Media

SHELLY GARCIA Staff Reporter A newly ensconced management team at the Media City Center in Burbank is considering overhauling or possibly selling the enclosed mall portion of the shopping center, which continues to lag in sales. Center Trust, which was formed last year when New York investment firm Lazard Freres & Co. acquired a 40 percent stake in Alexander Haagen Properties, said that while big-box stores surrounding the mall have been successful, the enclosed mall component has failed to live up to expectations. The company is studying the feasibility of redesigning the mall’s ground level into a big-box format. If the cost proves prohibitive, the company may opt to joint venture with another company on the redesign, or sell the mall outright. “It’s a great piece of real estate,” said Joseph F. Paggi, a senior vice president at Center Trust. “The location and the demographics are fine. The only flaw is the design flaw.” Paggi is one of a team of senior managers who came on board in April after Lazard Freres’ acquisition made it the principal shareholder in Alexander Haagen, a real estate investment trust. It previously had been controlled and operated by the Haagen family that founded the company. Officials at Manhattan Beach-based Center Trust blame the mall’s poor performance on the way its site is graded, leaving a portion of the mall’s first level sitting below street level. That below-grade area has failed to garner a significant share of customer traffic, and as a result, stores have been reluctant to locate there. While the mall’s anchor stores Macy’s, Mervyn’s and Sears have done well, overall annual sales at the mall average $275 a square foot, a performance Paggi calls “mediocre.” Well-performing enclosed malls have occupancy rates of 92 percent to 95 percent and generate per-foot annual sales in the “high $300s,” he said. One alternative would be to accommodate just one or two large users, and replace the mall’s south-facing entrance concrete fa & #231;ade with glass, making stores visible from San Fernando Road, which faces Burbank Village, a cluster of restaurants and an AMC movie theater. The redesign would involve situating one or two big-box users such as Old Navy or Bed, Bath & Beyond on the first level. That way, the mall would get another anchor or two and the other shops would not be burdened by the common-area charges involved in operating a three-level shopping center. Paggi, along with Burbank city officials, point out that the area has a large consumer base, as evidenced by the success of retailers like Ikea, CompUSA, Barnes & Noble and Office Depot, which are located in freestanding buildings outside the mall. Each of those stores has a different yardstick for measuring success. CompUSA enjoys about $1,500 in sales per square foot, whereas sales at Office Depot are about $200 per square foot, Paggi said. But both those levels indicate strong performance for the respective retail categories. “They’re performing very well,” said Paggi. “That’s proven out by the fact that they’ve been there a long time and they are prospering.” Paul Krueger, economic development manager for the city of Burbank, added that the stores inside the mall would have no trouble attracting shoppers if the mall were designed more effectively. “I wouldn’t say it’s the lack of tenancy or the type of tenancy,” Krueger said. “There are some very attractive tenants inside. I just think it’s a marketing issue of opening up the doors and being able to see what’s on the inside.” But that is likely to be very expensive, and Center Trust, which predominantly operates community centers with supermarkets and drug stores throughout the West, has not yet determined whether it wants to incur that expense. Center Trust is also considering entering into a joint venture with another company to revamp the mall. That option may be more feasible than an outright sale if financing avenues continue to tighten, as has happened in recent weeks due to the global economic crisis.