Outside the mall, homeless people loiter in the parking lot and trash collects at the curb. Inside, shoppers are scarce, a natural consequence given that most of the storefronts are vacant. Welcome to the Promenade, one of three properties in Westfield Corp.’s massive Woodland Hills shopping complex. Just three weeks ago, the developer unveiled the $350 million outdoor Village at Topanga mall, designed as a connector between the company’s two indoor malls, the Westfield Topanga and the Promenade. The contrast between the fanfare for the grand opening of the Village and the situation at the Promenade is not lost on Yossi Kviatkovsky, owner of the Rack, a sports bar and restaurant at the Promenade. The Rack is suing Westfield for alleged breach of contract. “I might as well have signed a lease on Ventura Boulevard as a stand-alone. Why do I need to pay the rents?” Kviatkovsky told the Business Journal. “I’ve had to market and reinvent myself in order to survive. What I am now is an independent establishment in a dilapidated mall having to be my own draw for my own customers.” The Rack filed the suit in California Superior Court on Sept. 10, alleging breach of contract and implied covenants. Kviatkovsky claims Westfield has failed in its responsibilities to maintain the 42-year-old Promenade after misrepresenting its intentions to give the mall a facelift. As outlined in the 2035 Warner Center Plan, the Promenade at 6100 Topanga Canyon Blvd. was supposed to be a part of Westfield’s Village at Topanga retail project. The developer said the new Village project would bring in approximately 20 million shoppers and ring up $1.3 billion in sales every year at the three-mall complex. But taking into account the Promenade’s vacancy rate and recent history, it’s unclear whether Westfield plans to keep the mall around much longer. Earlier this year, main anchor Macy’s Inc. pulled two stores out of the Promenade. The two Macy’s outlets, an apparel store and a furniture gallery, represented more than 270,000 square feet of space. Westfield purchased the land beneath the 81,000-square-foot furniture store from Macy’s in January for nearly $7.1 million, according to real estate data firm CoStar Group Inc. Macy’s shuttered the doors of both shops in the spring and they have remained empty. Soon after that transaction, news regarding the AMC Promenade 16 Theater, owned by AMC Theatres, became public knowledge. Westfield had purchased the multiplex theater in January from EPT Down REIT II Inc., a real estate investment firm in Kansas City, Mo., that owns land beneath several AMC multiplexes, for close to $43 million, according to CoStar. The theater is still functioning, though there has been speculation that it might close since Westfield plans to build a multilevel theater complex in the nearby Topanga mall where a 160,000-square-foot Sears store used to reside. When asked about its plans, AMC spokesman Ryan Noonan said the company does not respond to rumors or speculation. Currently, only a handful of tenants draw traffic to the Promenade, including the movie theater, Maggiano’s Little Italy restaurant and Ruth’s Chris Steak House, all of which are located along the perimeter. Inside, only a dozen or so shops remain. Since February, the McDonald’s Corp. restaurant has left, and tenants Arthur Murray Dance Studio, Ruby’s Diner and Petopia will be gone by early next year, according to Kviatkovsky. With Westfield now the sole owner of the 34-acre site, the question for real estate professionals is no longer whether the company will redevelop the property, but rather what type of development will replace the mall. “It’s a very good property, and it’s likely that it’s in a transition phase and Westfield has some plans for the property beyond what is currently there,” said John Hickman, managing director of the San Diego division of Newmark Merrill, a shopping center developer in Woodland Hills. “The (Promenade’s) vacancy is significant. It’s got to be at least half empty, and when you look at a property that has that sort of vacancy, generally upkeep of the property will face exceeding any revenue (Westfield) can generate.” Legal complaint Whatever Westfield’s plans, Kviatkovsky is seeking compensation for damages he said he has suffered at the dying mall. He has been at the Promenade for 10 years, during which time he has invested more than $1.5 million in his restaurant. When Kviatkovsky decided to come to the Promenade in 2005, he said it was Westfield’s reputation as a landlord that appealed to him. “The mall was 100 percent occupied when this space became available to us,” he said. “This was a high-end operation and it met our requirements for parking, security and safety.” Kviatkovsky said he began noticing the deterioration of the property around 2008. Every time he inquired about Westfield’s plans, the developer maintained that the Promenade was to be the food and entertainment hub of the Village retail project. “They spent an awful lot of money revamping the Topanga, and that’s when we started noticing that we were losing tenants – some of them were even poached to go from here to there,” he said. “I attributed that to the fact that we were the next improvement, the next in line for redevelopment.” Kviatkovsky said that assurance led him to renew his lease in February of last year. He now has a five-year contract that runs until 2020 with an option for an additional five years. But since his renewal, Macy’s has closed its doors, the mall has become roughly 80 percent vacant and Westfield has removed all references to the Promenade from the property and its website. Then there’s the lack of maintenance and parking enforcement, as outlined in the complaint filed by the Rack’s attorney David Rosen of Murphy Rosen in Santa Monica. “The common areas were not maintained, trash piled up, and odors oozed from the grease traps; the homeless began to encamp on the benches throughout the Promenade; and the parking lot became riddled with cracks and potholes,” the complaint stated. Specifics of the lease agreement were neither disclosed in the complaint nor by Kviatkovsky, but Rosen said that Westfield agreed to maintain the property as a “first-class regional mall.” Newmark Merrill’s Hickman said there are often clauses within leases that release tenants from a contract should the anchors go dark or mall occupancy fall too low. “I don’t know if some of the tenants in this situation have been given reduced rent or if Westfield has made any other concessions because of the vacancy,” he said. “Oftentimes, leases will allow certain tenants to cancel their lease or reduce rent if occupancy goes below a certain level.” Kviatkovsky neither confirmed nor denied whether such terms are outlined in his lease, but said he cannot just pick up and relocate, leaving behind his investment. “I cannot sell this to anybody. I am stuck and my investment is lost,” he said. “Nobody in their right mind is going to want to buy it.” Westfield’s plans Matthew May of May Realty Advisors in Encino said while it’s tempting to see Westfield as a bad landlord, the developer might have valid reasons for keeping silent about its plans. By releasing its plans to the public, he said, the developer is opening itself up to further scrutiny from local community groups and competitors that might wish to halt or stop any changes. “Westfield is smart; they can’t win by battling this in the media. There may be a very solid business decision to not share publicly what their plans are until such plans are finalized,” May said. “The Promenade is great real estate, so in the long term they will put more equity back into that real estate, (though) I don’t know what that will look like. Until it’s done, to put out misinformation or half information doesn’t benefit either party.” The Warner Center 2035 Plan, which was approved by the city in 2013, calls for a higher density of residential and office development in the neighborhood. Plan specifications call for 20,000 units of residential development as well as limited-height restrictions on most lots, streamlined entitlements and flexible parking requirements – all of which would go toward promoting a more pedestrian-friendly community. Also in the 2035 plan, Westfield announced and actively promoted its proposal to develop its $350 million Village at Topanga. But it is unclear whether the Promenade still fits into those plans. “The zoning in Warner Center allows for a lot of different uses, as does demand because Warner Center really is the downtown of the Valley,” May explained. “Given the amount of land Westfield has there, they have the capacity to build a few million square feet of space, whether that is office or residential. Warner Center’s new plan is high density, so considering that, what makes the most sense?” Westfield spokeswoman Katy Dickey said the company does not respond to matters under litigation. Carol Newman, a commercial and real estate litigator at Alleguez & Newman in Woodland Hills, said the lawsuit might not make it before a judge for at least a year, at which point it will likely go through arbitration. “There may be an arbitration clause in the lease, so if Westfield wants they can force it to arbitration,” said Newman, who is president of the San Fernando Valley Bar Association. “In a commercial tenancy, everything is governed by lease, unlike residential where certain landlords have certain duties as part of the law, whether or not included in lease. Without looking at the complaint or the lease I can’t say anything definitive, (but) the Promenade is reputed to be suffering.” Independent tenant Despite a lack of foot traffic in the Promenade, Kviatkovsky said the Rack has become a neighborhood hangout for sports lovers and foodies. Kviatkovsky, who also owns Q’s Billiard Club in Los Angeles and Pasadena, has made renovations to the Rack over the last five years to appeal to more customers. The restaurant has two sections, one dedicated to live music and comedic performances for audiences of all ages, and a 21-and-over bar and pool section that has a half-dozen television screens hanging from the walls playing sports programs. Eleven pool tables are dispersed throughout the bar and thick leather couches line the walls, adding to a lounge vibe. Craft beer, an extensive wine collection and various cocktail selections are available at the bar, while the kitchen serves breakfast, lunch and dinner. Kviatkovsky hosts events throughout the week to drive traffic, from a local band night on Tuesday to the open mic and comedy nights on Wednesday and Thursday. The eatery is directly adjacent to the movie theater and is open until midnight on weeknights and 2 a.m. on weekends, with a few variations. Though he has carved out a business, Kviatkovsky said Westfield’s alleged neglect is making it nearly impossible to keep customers coming. Many of the lights in the parking lot do not work, making it very dark at night, and the lack of security has allowed an influx of the homeless to the property, according to Kviatkovsky. May Realty’s May does not think the suit will negatively affect Westfield’s reputation with present and future tenants, but he believes the suit might encourage tenants to be attentive to details when signing leases. “Westfield builds really nice projects and they’re very good operators and merchandisers,” he said. “I think what (the suit and the state of the Promenade) may impact in the shorter term – because peoples’ memories are short – is the need for tenants to be more careful with their leases.” Kviatkovsky, with a lease that runs for five more years, sees no alternative but to stay and fight a legal battle for his business. “Selling is not realistic and walking away is not an option,” he said. “That’s why we filed the lawsuit. We want to recover our investment and recover our ability to have a future.”
