Shopping Center Business

MAY 2015

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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134 • SHOPPING CENTER BUSINESS • MAY 2015 center court creating an dynamic feel in this critical area. "Now, instead of a dead wall at center court, we will have a very attractive two story H&M," says Wolstein. "We help our retailers by improving our properties, whether that is through operational excellence or adding new and better merchants," says Coury. "If we be- lieve in a concept, we will help them as much as possible." "We view ourselves as the strongest player in the A-minus mall segment," says Ball. "We have not bought any A- plus-plus trophy assets, but our portfolio is predominantly composed of A and A- minus quality malls or B-plus malls that will be enhanced to A or A-minus quality on our watch." "We don't have any bad real estate," adds Wolstein. The company's investment strategy has been to acquire and operate the dominant assets in the submarkets where they exist. It has rejected a number of possible prop- erties because they were the second-best properties in a market. Within submarkets, Starwood Retail has gone after only the dominant assets. In Chicago, the company turned down a quality mall because it was in the shad- ow of a better mall. Wolstein estimates that, despite having acquired close to 30 properties, that Starwood Retail has con- sidered and gone through some level of due diligence on about 150 properties. "Our company came along at an op- portune time when the major mall owners were being pressured to raise their aver- age sales per square foot. The short cut to doing that is to prune the portfolio," says Wolstein. "A mall that performs at $450 per square foot, which is our proto- typical acquisition, is a solid mall that has a permanent place in the market where it can survive and flourish. However, if that is at the lower end of your spectrum when your other centers are performing at $700 per square foot, disposing of a $450 per square foot asset will accomplish your objectives." Building for the future A large number of Starwood Retail's projects are going through some level of capital expenditure project. From small improvements to major redevelopments, the company is putting its touch on its acquisitions while creating value for inves- tors and retailers, and creating a better environment for shoppers. Starwood Retail is creating a lot of 'eat- ertainment' areas at its regional malls, add- ing in higher end restaurants at convenient entryways and plazas. The company even plans to raze some former department store boxes and create a cluster of res- taurants in their place. At Franklin Park Mall in Toledo, Ohio, the company is creating a new plaza with five restaurants, a common area space and entertainment. These new features will replace an area of the mall that was tenanted by Coldwater Creek, an underperforming restaurant, a nail salon and a truck dock. It is also recladding the front of the Macy's store with two restaurants. "Now, we have a large restaurant component at the center," says Coury. "Whereas we had a good front door be- fore, we are going to have an amazing front door when this is complete." At The Shops at Willow Bend in subur- ban Dallas, Starwood Retail is removing a vacated Saks Fifth Avenue store and creat- ing a plaza with four restaurants around a new solid anchor. At Chicago Ridge, the company worked with AMC Theatres to renovate an older eight-screen theater into a new VIP-expe- rience theater. While the theater reduced its seat count by 60 percent, sales went up 300 percent over a two-year period. "Retailers are going through a sea change right now," says Wolstein. "Years ago, you would never get this many restau- rants approved. Department stores feared they would cannibalize parking. Today, they embrace the traffic that restaurants bring to their front door." At Northridge Mall in Salinas, Califor- nia, even bigger plans are afoot. The cen- MacArthur Center in Norfolk, Virginia (above), and Metreon in San Francisco (below) are two centers that Starwood Retail has acquired in urban areas.

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