Struggling Anaheim GardenWalk is the latest—and largest—Orange County shopping center slated for a makeover intended to boost entertainment options for its shoppers while de-emphasizing traditional retail stores.
The high-profile mall, located across from Disneyland and the Anaheim Convention Center, got a long-awaited change in ownership last week. New York-based investment firms Arcturus Group LLC, Avenue Capital Management and Elliott Management Corp. became the third owners of the property since its opening in 2008.
A group of lenders led by Citigroup Inc.—which took over the center in 2010 after its initial developers defaulted on a $210 million construction loan—sold the property. Terms of the deal were not disclosed.
466,000 SF
The 466,417-square-foot center was expected to fetch offers in the $90 million to $100 million range when it was put on the market early this year. Reports show the new ownership group getting a $65 million mortgage for the property.
The new owners aim to reinvent the center—whose vacancy rate is about 50%—as an entertainment venue.
“[There is] enormous potential for GardenWalk as an entertainment-oriented retail destination, given its design and location,” Arcturus co-founder Jonathan Mayblum said. “Our group intends to unlock the potential of this magnificent, but previously financially challenged, asset.”
The new owners said they had “plenty of capital” to pay for tenant improvements and leasing commissions, as well as several capital improvement projects during the next few years. It’s believed they will need to sink an estimated $35 million or more into the revitalization of the star-crossed mall, which opened amid the last recession and has thus far failed to gain much leasing traction.
The shopping center has a strong base of busy restaurants along its Katella Avenue entrance, with several entertainment tenants on the opposite site of the property along Disney Way.
There are far fewer occupants in the interior of the center.
Perimeter Play
Plans in the works involve some “plastic surgery” for the property, with a goal of giving guests on the perimeter of the center more incentive to make their way through the entire property, said Scott Kaplan, senior vice president for the Newport Beach office of CBRE Group Inc.
“We want to make it friendlier to shop,” said Kaplan, whose team was given the leasing assignment for the center by the new owners, along with Cooperstown, N.Y.-based McGarey Group.
The new leasing team said they’ve already been in contact with 20 potential tenants, including some notable retailers, Kaplan said.
For the most part, “what works here is food and entertainment,” Kaplan said. “We plan to add more of what works.”
Recent rezoning efforts with the city will allow the new owners more flexibility in their tenant mix, Arcturus said.
The new owners see their customer base encompassing Disney tourists, office tenants, convention goers, current and future residents of the nearby Platinum Triangle, and sports fans making their way to Angels and Ducks games.
Restart Button
There’s a wide variety of potential tenants at the center that can appeal to those groups, according to Kaplan.
“We plan to hit the restart button” on the center, he said.
The new owners of GardenWalk can look to a pair of area malls as potential models for their revitalization efforts.
Owners of the Triangle Square mall in Costa Mesa are in the midst of an estimated $25 million reworking of the nearly 200,000-square-foot center, which has been renamed The Triangle.
The Triangle, located at the end of the Costa Mesa (55) Freeway, is being updated to emphasize entertainment options and restaurants—new additions include a 24 Hour Fitness gym, bowling alley, and Saddle Ranch Chop House—rather than the traditional retail shops that initially made up the bulk of the center’s tenants.
The 241,000-square-foot Kaleidoscope mall in Mission Viejo has added a new base of entertainment and theme-related tenants to its mix since selling for $22 million in a lender-driven transaction in 2010.
Big Picture
A similar trend is playing out across the country, especially for traditional, enclosed malls. A recent report from Newport Beach-based real estate analysis firm Green Street Advisors estimated that 10% of the country’s roughly 1,000 large malls will fail in the next 10 years and need to be converted into uses with much less traditional stores.
Ownership groups buying some of these shopping centers now at distressed-asset prices, as in the case of GardenWalk, should have the financial flexibility to make their redevelopment plans work, according to CBRE’s Kaplan.
“They can afford to reposition (the centers) to what makes sense for the customers,” he said.
