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Sunday, May 26, 2024

Burbank Blues

Walk through the Burbank Collection on any weekday afternoon and almost all the foot traffic at the mixed-used complex surrounds the adjacent AMC 16 Theatre. Restaurants on the ground floor of the downtown Burbank retail center, such as Panera Bread Co., have few eaters inside. The retail stores are quieter, perhaps even empty. Now, some changes look to be in store for the 40,000 square feet of ground-floor retail, purchased last month for $12.8 million by a joint venture led by KBS Strategic Opportunity REIT Inc. of Newport Beach. The investment firm has not disclosed specific plans for the complex, more than 40 percent vacant, but has said a priority is finding an anchor tenant and making a variety of improvements to boost sales. Already, KBS has hired CBRE Group Inc., the large West Los Angeles real estate services company, to “professionally” manage the complex. “(We) do plan to address any deferred maintenance and will invest capital strategically to improve the retail shopping experience and attract new retail to the location,” said Jeff Rader, vice president, KBS Capital Advisors, in an email sent to the Business Journal. The REIT is sponsored and managed by KBS Capital Advisors, a division of KBS Cos., a Newport Beach firm co-founded by Peter Bren and Charles J. Schreiber Jr. in 1992. Bren’s brother, Donald, is the billionaire chairman of Irvine Co., the large developer also based in Newport Beach. KBS Capital Advisors owns more than 15 properties in California, including Union Bank Plaza in Los Angeles. The firm has made more than $8 billion in real estate acquisitions through its five non-traded real estate investment trusts since its inception in 2006. The Strategic Opportunity REIT is focused on acquiring distressed loans and properties. The project was acquired from Champion Real Estate Co., a Los Angeles real estate developer run by principal Bob Champion. The firm built the project, which features 118 condos on its upper floors, with financial assistance from the Burbank Redevelopment Agency. But it opened in 2008 at the height of the recession, and it has never attracted an anchor tenant while foot traffic is generally light except for weekend nights when the theaters attract large crowds. The condos, which were not part of the deal, sold out last year but some of the units were reportedly being offered for as much as 40 percent less than the initial asking price. The redevelopment agency invested almost $15 million into the project, with most of the money going to erect the parking structure, which has more than 700 spaces, including 278 for public use. Joy Forbes, Burbank’s deputy city manager, said the city hopes the new owner will be able to improve the center. “With this new commercial owner, they’ll know how to make better use of the space,” said Forbes, who hopes to see what she called a more “professional” management group produce more income and foot traffic for the center. Champion, who has had a successful career developing multiple projects in Hollywood, declined to comment. Uphill battle The mixed-use project was developed as the real estate boom was in full swing, and it was seen as a way to complete the development around the AMC Theaters, which opened in 2003. It is bounded by the downtown portion of San Fernando Road and First Street, and between the theaters and Orange Grove Avenue. Construction began in March 2006, but was not completed until after the financial crisis. The center has attracted some popular eateries, including locations of Barney’s Beanery, Pinkberry Inc., Johnny Rockets Group and Panera Bread. However, more than 15,000 square feet is vacant along First Street next to Barney’s Beanery. Bianey Vasquez, store manager of the Pinkberry, said her store is one of the more successful branches in the area, largely because of its weekend traffic. It serves about 500 customers on Saturday and Sunday, but just 750 combined on the other days of the week. “There are weekdays when there is literally nobody out there,” said Vasquez, who has managed the branch for the last 18 months. “The customers I talk to don’t even know we’re here. They live in Burbank and don’t know we’re here.” One of the main problems is that most of the retail faces the theater, tucked away along a narrow corridor set off from San Fernando Boulevard, the main commercial road downtown. Todd Butler, a financial advisor at WESCAP Group in Burbank, has worked for five years in the same office building, less than a mile away from the Collection. He walks to the center on his lunch break several times a week, but said he would have never known about it if he didn’t work so close. “It’s just a really odd location,” said Butler, who also believes the parking garage needs better signage. Destination retail Forbes said she believes the retail also has suffered because it took so long to sell the condos. “All of the residential parts came up (for sale) right when the economy was tanking. That led to the difficulties with retail,” she said, adding the city has no plans to invest any more in the center. “We think we’re doing our part. We put a decent amount of money into the infrastructure and provided a clean and safe downtown for retailers to flourish.” However, the city is willing to work with the new owner to rethink the retail. Forbes said Champion approached the city about luring a gym into the space, but the presentation was not compelling and the city turned it down. The city might even allow more restaurants. “Obviously, retail is very important,” Forbes said. “But we know restaurants drive in business.” Matthew May, a retail broker and president of May Realty Advisors in Los Angeles, said part of the problem is that most of the retail isn’t destination quality. “The key is not just to bring in a lot of people. It’s how to get them to come before a movie and stay after. Everybody thinks that a theatre is going to bring everybody in, and that’s true. But it’s on a limited basis,” he said. May suggested restaurants such as a Cheesecake Factory or a T.G.I. Friday’s might work. Also, he said the new management should consider making the shopping center more of a family destination, in line with the city’s demographics. “A kids-oriented place would pull 10 miles,” May said. “If kids are there, they bring the moms. The moms are yanking the dads along, and then the dads shop.”

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