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Thursday, May 30, 2024

Breakthrough at The Oaks

When The Macerich Co. agreed to acquire two of the anchor stores at its Thousand Oaks mall, the company was buying a lot more than real estate. Plans for a major overhaul of The Oaks, a mall the company bought in 2002, had been held up ever since Federated Department Stores Inc. agreed to acquire May Department Stores Co., and by acquiring the two anchors from Federated, Macerich can both move ahead with its plans and make changes to the mall’s design it could not have done if the stores continued under Federated ownership. “At The Oaks, this really kick-starts the opportunity to accelerate an expansion,” said Arthur Coppola, president and CEO of Macerich in a conference call discussing the acquisition. “It’s a very, very significant opportunity.” With the acquisition, expected to close next month, Macerich will begin an overhaul of the center that will include building a new, 144,000-square-foot Nordstrom, and expanding its outdoor shopping area, an increasingly important part of shopping center design, to include 112,000 square feet of new shops and restaurants. Although no deal has yet been signed, Macerich is also hoping to add a new stadium-seating movie theater that will be the first of its kind in Conejo Valley. In addition, the company is believed to be close to inking a deal for Crate & Barrel to occupy a 30,000-square-foot freestanding store along the eastern end of the mall. The Federated-May merger, which joined Macy’s and the former Robinsons-May division under one roof and one Macy’s brand, has produced numerous duplications at malls across the country, putting a crimp in the plans of many mall operators. Perhaps even more than most, Macerich suddenly found itself with four anchor stores all owned by the same company at its Oaks mall. Its only other anchor is JC Penney. Worse yet, Federated had to divest a number of its newly acquired stores in order to satisfy anti-monopoly concerns raised by state and federal regulators. The process could have held up Macerich’s plans for years. Macerich, which is expected to close on the deal in July, will acquire one of the Macy’s units and one of the Robinsons-May units as part of an 11-store acquisition deal. Although Macerich would not release the details of the acquisition, the company said that it paid “something in the neighborhood” of $50 to $60 per square foot of gross leaseable area when all the 11 acquired stores are considered. But perhaps more than the individual decisions about what to include in the mall, the acquisition frees Macerich up to move forward and remake the mall to its own specifications. “These properties did not have to end up in our hands,” said Coppola. “They could have ended up at retailers that weren’t exactly on the top of our list.” When Macerich acquired The Oaks, it bought an outdated, 25-year-old mall that was badly in need of refurbishing. The center spills out to just one main road, its parking area is poorly distributed around the mall, at some points at great distance from the mall entrance, and visitors have to walk the length of the sprawling center to get to the one escalator and elevator connecting the two levels. Instead of a food court, fast food outlets are scattered throughout the mall, and the play area, another increasingly popular mall feature, is tiny. But almost as soon as Macerich completed a design for its remodel, including winning the coveted Nordstrom deal in a fierce competition with other center operators, Federated announced plans to buy May Co. putting all of Macerich’s plans on hold. Regulators required Federated to divest a number of its stores including at least one at The Oaks, a process that may take years to complete. And even if the Oaks stores were sold off earlier, Macerich would have no guarantee that the new owners would be retailers they wanted to have at their mall. “We now anticipate opening the new Nordstrom 18 months faster than we had hoped,” Coppola told the investor group. “We’re very bullish on that location.” Before the acquisition, Macerich also would have had to work around its anchors to expand its outdoor area, accommodate better parking facilities and expand its outdoor area. Now it can tear down the two stores for its remodel, an adjustment that is not lost on the environmentally-conscious city of Thousand Oaks. “The redevelopment will be smaller, but it will still have all the components,” said Gary Wartik, economic development manager for the city of Thousand Oaks. Despite the smaller development, the redone Oaks is expected to net a higher volume of sales tax revenue for the city. “I would say on balance, after we net everything out (accounting for the loss of Robinsons-May) we’re looking at probably a $400,000 to $500,000 sales tax increase,” Wartik said. The new mall will be completely redone in a style that Nicole Schmitt, senior marketing manager for Macerich, called “Santa Barbara-esque.” Additionally, the operators are planning an additional lineup of stores, many at the upper-end. “I think what we have the opportunity to do is keep the retailers we have now, but broaden our choices,” said Julia B. Ladd, senior manager for property management at Macerich. “We have a vast price range and we just want to broaden that.” So far, Macerich has inked deals with three new retailers, including the first Forth & Towne to locate in Southern California. The store is a new concept from Gap. Forever 21 and Solstice Sunglass Boutique. A second phase of the redevelopment, which could take as long as 10 years to complete, could include a 100,000-square-foot upscale department store such as Saks Fifth Avenue.

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