Coventry Real Estate Advisors in New York has put its portion of Buena Park Downtown on the market, seeking a deal that could reach $100 million.
The enclosed mall, a block from Knott’s Berry Farm in Buena Park, is bounded by La Palma Avenue on the north, Stanton Avenue on the west, Dale Street on the east, and a residential neighborhood on the south.
Coventry leases 535,016 square feet to national retail chains, such as 24 Hour Fitness, Bed Bath & Beyond Inc., DSW Inc. and T.J. Maxx, and to the Krikorian Premiere Theatres and Big Air Trampoline Park entertainment venues.
“You don’t see opportunities to acquire properties this large with this strong of fundamentals in Orange County,” said Philip Voorhees, senior vice president at CBRE Inc., which is marketing the mall.
Buena Park Downtown is in a “densely populated area with strong demographics,” according to the property’s marketing materials—more than 274,000 people from households with an average annual income of more than $71,000 live within a 3-mile radius. A 5-mile radius takes in 658,000 people in households with a $78,000 average income.
That puts the draw area on par with the median household income for all of Orange County, which stands at about $75,000, well above the state and national marks.
Also in the area: the likelihood of new competition for shoppers from the Source at Beach, a 428,000-square-foot outdoor mall less than two miles away that’s scheduled to open early next year.
Price Tag
Voorhees declined to disclose an asking price for Coventry’s share of Buena Park Downtown, but the property’s marketing materials and commercial real estate industry insiders suggest the opening bid could start at about $97 million.
A couple of recent sales of local shopping centers came in above $100 million. The 280,574-square-foot Orchard in Lake Forest fetched $122 million from Columbus, Ohio-based Schottenstein Property Group Inc. in 2012. And Indianapolis-based Simon Property Group Inc. sold the 846,885-square-foot Laguna Hills Mall—which had a high vacancy rate at the time and is now undergoing a renovation—to Merlone Geier Partners in San Francisco for $110 million in early 2013.
Buena Park Downtown’s two main anchors—Sears and Wal-Mart, both of which occupy stand-alone buildings—aren’t included in the offering. Wal-Mart Stores Inc. is leasing its 248,513 square feet from Elliot Megdal & Associates in Los Angeles. Hoffman Estates, Ill.-based Sears Holdings Corp., which lately has been raising cash by selling hundreds of stores to a real estate investment trust, owns the 250,988-square-foot retail space and adjacent auto center.
Neither property is actively being marketed, but that doesn’t mean they’re off the table in the foreseeable future, according to Voorhees.
“Something is going to happen with that Sears—it will be either redeveloped by [the company or] acquired by somebody,” he said, adding that this could be a “transitional” period for the property if the new owner added a multifamily homes project at the Sears site in the event that it became available.
Voorhees likened the mall’s potential to the open-air Bella Terra center in Huntington Beach, which integrates residences with outdoor shopping and entertainment spots.
Comps
Buena Park Downtown had an estimated $179 million in taxable revenue during the 12 months that ended last June. It has 69 spaces rented and another 19 that are vacant.
Several large tenants—T.J. Maxx, DSW and Big Air Trampoline Place —have about 10 years left on their leases. Their monthly rents, according to the property’s marketing materials, range from 83 cents per square foot to $1.25 per square foot, well below market. Other retailers, such as Anaheim-based Pacific Sunwear of California Inc., fall in the same range, but their leases are scheduled to expire in the next 24 months. They combine for 87,000 square feet of leasable space.
“Propertywide rents are only averaging $1.21 per square foot … and the Orange County average is more like $2.12 per square foot,” Voorhees said. “That will create repositioning opportunity for the next buyer coming in.”
Increased rents would put Buena Park Downtown in line with 1.8 million-square-foot Village at Orange. The shopping center has Wal-Mart and Sears as anchors and averages $2.25 per square foot in monthly rents. It had $169.1 million in taxable sales through June 2014.
Nearby, 778,781-square-foot Outlets at Orange averages $3-per-square-foot leases, while South Coast Plaza in Costa Mesa and Fashion Island in Newport Beach command top rent in the county at $5.50 per square foot.
History
The mall, built by Allison Honer, opened in 1961 with May Co. and Sears as anchors. It was the third mall in the county, trailing the now long-closed Broadway Center in Anaheim, which opened in 1955, and Bullock’s Fashion Square in Santa Ana, which came three years later and is now known as Westfield Mainplace. Fashion Island and South Coast Plaza opened in 1967.
Australia-based City Freeholds (USA) Inc. acquired Buena Park Mall in 1976, investing about $20 million to enclose it and add a second floor.
Sunrise Buena Park LP, a partnership controlled by the Pritzker family of the Hyatt hotel chain in Chicago, bought the mall for $41 million in 1995. It completed a $70 million mall makeover in 2002, which enabled the Krikorian theater to slide into the space formerly occupied by JCPenney.
DDR
Coventry formed a joint venture in 2004 with DDR Corp. in Beachwood, Ohio—Coventry II DDR Buena Park LLC—to acquire Buena Park Downtown and adjacent open-air shopping center Buena Park Place for about $91 million. DDR, which owns and manages about 400 “value-oriented” shopping centers, or discount resellers, took on day-to-day management of the Buena Park properties and a 20% stake, and Coventry covered the remaining 80%.
The joint venture was recently dissolved following a breach-of-contract suit Coventry filed in 2009, alleging DDR mismanaged about a dozen properties they acquired together starting in 2003, including Buena Park Downtown. DDR got full ownership of Buena Park Place, while Coventry retained the title for Buena Park Downtown. All charges in the associated lawsuits were dismissed, according to DDR.
