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Sunday, Oct 2, 2022

Taylor Morrison to Pay $160M for Westminster Mall Site

Homebuilder Taylor Morrison Home Corp. is under contract to pay north of $160 million for a 43-acre portion of Westminster Mall, with plans for a major residential development next to the area’s 13th largest mall by sales in the works.

The deal marks the largest reported residential land sale inked in Orange County this year.

It also marks the first big planned investment in OC for Taylor Morrison (NYSE: TMHC) since the Scottsdale, Az.-based builder closed on its $2.5 billion acquisition of Newport Beach-based William Lyon Homes about nine months ago, creating the country’s fifth largest homebuilder.

The sale represents another vote of confidence for Orange County’s homebuilding industry, with builders—in particular publicly-traded ones—snapping up several large infill sites outside the region’s three largest master-planned communities of late.

Close to $400 million has been spent on development sites in San Juan Capistrano, Lake Forest, Orange, Santa Ana and Westminster over the past two months, according to property records. Nearly 1,900 homes and apartments could be built on those sites.

JC Penney, Macy’s

The Westminster Mall transaction should soon result in a clearer vision for one of Orange County’s oldest and largest shopping centers, where a large-scale renovation has long been in the works.

Regulatory filings indicate that Taylor Morrison will pay $160.1 million for a 43.1-acre parcel at the shopping center from Washington Prime Group (NYSE: WPG). The deal works out to about $3.7 million per acre, and $194,000 per planned residential unit.

The contract for the site is written under the assumption that 825 for-sale residential units will be built at the property, although that figure is subject to entitlements. Anywhere from 700 to 1,000 homes could ultimately be built, the contract indicates.

The deal is expected to close in the second half of 2022.

The site of the mall’s JC Penney store, which Washington Prime owns, is expected to be part of the sale and would be razed to make way for homes.

Taylor Morrison is also expected to enter separate negotiations with Macy’s to buy that department store’s land at the mall, which could result in even more homes being built, the contract indicates.

The builder, which has local operations in Newport Beach, last week declined to comment on the sale, or its plans for the property.

Product Switch?

Washington Prime previously indicated it was in talks to sell the land to an undisclosed apartment developer.

The Nov. 5 contract between the two parties specifies for-sale homes as the expected development type, with potential product types including townhomes, three- and four-story stacked flats, and detached homes.

Though Taylor Morrison’s specific redevelopment plans have yet to come to light, prior proposals called for converting the mall—located alongside the San Diego (405) Freeway and Bolsa Ave.—into a mixed-use development with new retail, office, residential and entertainment components totaling nearly 2 million square feet.

The amount of homes, and location of the residential development, would appear to limit some of the other previously proposed development types for the mall site.

The mall currently counts some 1.1 million square feet of retail space and is on about 100 acres in total.

It counts multiple owners; the largest owner there is Columbus, Ohio-based Washington Prime, which operates the main enclosed portion of the center. Its holdings there total nearly 54 acres.

Washington Prime said it will retain a portion of the mall site post-sale, and that it will still own the nearly 11-acres of parcels that will hold the retail component of a planned mixed-use redevelopment at Westminster Mall site.

The sale to Taylor Morrison will result in proceeds of about $50 million to the real estate investment trust, which counts a market valuation of nearly $130 million. Westminster Mall is Washington Prime’s only local holding.

Kaiser Plans

Taylor Morrison’s deal at Westminster Mall follows recent news of another major development slated for another part of the 46-year-old shopping center.

The Business Journal was first to report in the Nov. 9 print edition that Kaiser Permanente spent $40 million for a 10-acre site at the mall, with plans to build a new medical office facility.

Kaiser acquired three properties totaling about 128,000-square-feet on the northern edge of the mall from private investor Krausz Cos. for about $313 per square foot, and nearly $4 million per acre.

The purchases include two vacant properties, as well as a 55,000-square-foot Best Buy store. That tenant is slated to stay on through at least 2026.

Preliminary proposals call for a phased construction of a “large medical office with primary and specialty care,” according to Tony Smale, Kaiser’s lead planner for Orange County.

Changing Malls

As the retail sector continues to face headwinds, investors—such as Taylor Morrison and Kaiser—have been tapping some of the area’s larger mall sites in recent years as a source for development opportunities.

Such is the case at Brea Mall, where redevelopment plans are ongoing to convert a former Sears location into a mixed-use site including 150,000 square feet of new retail use and more than 300 residential units.

An even larger renovation is planned in Santa Ana’s MainPlace Mall, which won approvals last year for a $300 million investment plan that would build two apartment communities totaling 700 units and add new retail, dining, entertainment and common space uses in a project led by owner Centennial Real Estate Co.

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