A Dallas investor wants to give a makeover to a mall in suburban Los Angeles as struggling retail properties across the nation add residential and other uses.
Centennial aims to redevelop the 1 million-square-foot Valencia Town Center at 24201 Valencia Blvd. in Santa Clarita, California, after buying the property for $199 million, according to statements by Centennial and French seller Unibail-Rodamco-Westfield. URW had been searching for a buyer after it stopped making payments on the property's $195 million in secured debt.
The mall sits on 60 acres and features more than 140 retail, restaurant and entertainment tenants, according to Centennial. Carl Tash, chief investment officer and senior executive vice president of Centennial, said the company may pursue a redevelopment similar to what it did at Fox Valley Mall and the Hawthorn mall in greater Chicago. Plans at those properties have called for housing, a park, coworking space and more.
"While it is too soon to announce any definitive plans, Valencia Town Center is in the perfect location to become a multi-use live-work-play destination that seamlessly and aesthetically combines retail, restaurants, entertainment, luxury living and office space in a single master-planned campus," Tash said in the statement.
Housing is in demand in Santa Clarita. The market's multifamily vacancy rate is 4.7%, below the greater Los Angeles average of 4.8%, CoStar data shows. The average monthly asking rent is $2,548, above the greater Los Angeles average of $2,236.
The COVID-19 pandemic has sped the transformation of the retail landscape by driving consumers to online retailers and away from certain brick-and-mortar shopping, particularly large enclosed malls.
In the Seattle suburb of Lynnwood, Washington, a Sears store was knocked down to make way for a 328-unit apartment complex called Avalon Apartments, which opened in 2021. In South Jersey, around 1,000 apartments are planned to be built at the Moorestown Mall as part of a broader construction effort to breathe new life into the retail property, according to the Philadelphia Inquirer.
Loan Payments Stopped
The Santa Clarita deal comes after URW said in a February 9 financial report that it stopped repaying the secured debt on Valencia Town Center when it matured in January. The Paris-based real estate giant couldn't refinance its loan related to the mall before the maturity date, according to CoStar data. The mall's asset value was $100 million as of December 2022.
URW had planned to sell off its entire U.S. portfolio by the end of 2023 but decided to slow down its sales plans in recent months. For example, the company landed a $925 million cash-out refinancing of its most prized U.S. mall: the 1.4 million-square-foot Westfield Century City in Los Angeles that’s valued at nearly $2 billion. The change of plans comes at a time when retail sales are up, and higher interest rates continue to flummox real estate buyers and sellers.
URW has sold several greater Los Angeles malls in recent years, though. In March 2022, it sold a property slated for redevelopment, Westfield Promenade Mall in the Woodland Hills area of Los Angeles, for $150 million. Then in August 2022, it sold the 1.5 million-square-foot Westfield Santa Anita at 400 S. Baldwin Ave. in Arcadia for $537.5 million.
The Santa Clarita retail market has a 4.7% vacancy rate, which is below the greater Los Angeles average of 5.4%, according to CoStar data. The market's average rent is $31.99 per square foot, below the greater Los Angeles average of $35.63 per square foot.