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Friday, Jun 9, 2023

SFV Re Column

BOB HOWARD Escrow is expected to close shortly on a sale that could bring a long-awaited solution for one of the San Fernando Valley’s most prominent problem properties, the Sherman Oaks Galleria. The Galleria, which includes 516,000 square feet of retail space and 388,000 square feet of office space at the corner of Sepulveda and Ventura boulevards, is a once-successful mall that has been losing tenants and shoppers steadily in recent years. A partnership of Prudential Real Estate Investors and Dai-Ichi Insurance Co. is expected to sell the Galleria to Beverly Hills-based Douglas Emmett Realty Advisors for about $55 million. Neither the owners nor the buyer would comment on the sale, but a source close to the deal said it could close by Aug. 1. Gerald Silver, president of Homeowners of Encino, said he met with Douglas Emmett representatives Dan Emmett and Josh Simms regarding plans for reviving the ailing mall. Silver said he felt “quite positive” about Douglas Emmett taking over, an important point because homeowner support is considered essential for any new development plans at the Galleria. Silver said that Douglas Emmett representatives told him they have no plans to seek permits to expand the mall any more than currently allowed under its entitlements with the City of Los Angeles. The Galleria under Prudential-Dai-Ichi ownership has been managed by LaSalle Partners Management Ltd., which would not comment on a potential sale, and referred calls to Douglas Emmett. Douglas Emmett also declined to comment on the project. Silver’s group and the Sherman Oaks Homeowners Association opposed an expansion proposal by the Prudential-Dai-Ichi partnership last year that would have required additional city entitlements because the Prudential-Dai-Ichi group wanted to add 3,600 more movie theater seats to the 1,000 existing seats at the mall, as well as 10 restaurants with full liquor licenses, and 60,000 square feet of space for virtual reality attractions. Following pressure from homeowners, the L.A. City Council granted only some of the requested additional entitlements. Sharon Mayer, an aide to Councilman Michael Feuer, said the entitlements now permit the new owners to add up to 3,000 more movie seats and eight restaurants, but no virtual reality space. Two of the restaurants would be limited to beer and wine licenses, but the six others would be permitted to have full liquor licenses, Mayer said. Silver said that homeowners don’t oppose development, per se, but would like to see “high-quality retail” and/or new office construction or “almost anything other than” the $30 million entertainment center that had been proposed. Allen Young, senior vice president at CB Commercial Real Estate Group Inc., who helped negotiate the original leases at the mall in 1980, said that the Galleria has faced competition from other Valley malls that have been renovated and remodeled to include more movie theaters, trendier restaurants and food courts, and a generally livelier environment. At the Promenade Mall in Woodland Hills, he pointed out, “sales have gone up substantially and there is a lot more foot traffic” since a Saks Fifth Avenue department store was razed and a 16-screen movie theater built in its place in March of 1996. Young is representing developer MEPC American Properties of Dallas at another Valley mall renovation, the Northridge Fashion Center, where construction is slated to begin this month on a project to raze a vacant Robinsons-May department store and replace it with a 10-screen theater complex. The mall also includes a vacant Broadway department store, which the developer hopes to remodel to include a large bookstore and entertainment-oriented attractions, Young said. According to Young, whose office is in the Galleria’s 270,000-square-foot, 15-story office tower, the Sherman Oaks center has suffered from not keeping up with shoppers’ changing tastes, competition from other malls and the consolidation of department stores. The Galleria formerly included a Robinsons and a May Co. store, but it now has two Robinsons-May stores since the chains merged. Although there are many vacant retail spaces at the Galleria, Young said the office tower he’s in is 90 percent leased and demand for office space is strong in the neighborhood. The center’s 118,000-square-foot lowrise office building, on the other hand, was allowed to go nearly vacant because the former owner was thinking of razing it under the now-defunct expansion proposal. Young believes the space could be filled if the new owner decides to keep it as office space. According to Young, the mall has good potential for both office and retail success because of its “tremendously prime” location. “It’s a prime location that needs a major facelift, but I think anything they do here will succeed. It’s just too well-located not to succeed if they get the right retail or office in here,” he said. Project Groundbreaking Beverly Hills-based West America Construction Corp. was slated to break ground July 30 on a $6 million project to build nearly 80,000 square feet of speculative industrial space at Freeway Business Park, a pre-existing development at Highway 118 and Route 23 in Moorpark. According to Bram White, executive vice president at the Camarillo office of Daum Commercial Real Estate Services, the five buildings West America will build for sale or lease at the site represent one of two speculative industrial projects the company has planned at the business park. The other is a $9 million project to include approximately 138,000 square feet in three buildings. Nick Brown, president of West America, said his company has built more than 50 industrial buildings totaling more than 900,000 square feet in Moorpark since the early 1980s. West America still owns and manages 100,000 square feet of that space and has sold the rest to owner-users over the years, Brown said. Brown said construction is expected to be finished by this fall on the $6 million project, but no dates have been set yet for the beginning or end of construction of the second project. White said the buildings at both projects have been designed to be smaller than the “big box” buildings being constructed at other sites because Ventura County is just starting to evolve as an industrial distribution and warehouse center. He said the buildings in the two projects will range from 18 to 24 feet in height, compared with typical 30-foot heights in modern L.A.-area projects. The tenants expected to occupy the West America projects are smaller firms that don’t require the higher ceilings, he said. “What we’re getting in the market up here are users and owner-users from the San Fernando Valley and eastern Ventura County who are moving up into slightly larger spaces from startup buildings of a couple thousand square feet,” White said. Chicken on Fire A fast-growing El Pollo Loco franchisee called Mi Pollo has signed a $1.1 million lease for a new restaurant in Agoura Hills that will be the eighth El Pollo location operated by Mi Pollo, according to President Joe Lopez of Van Nuys-based Westcord Commercial Real Estate Services, who has represented Mi Pollo on five of the eight leases. Lopez said the Mi Pollo franchisee since the first of this year has signed three leases. The combined value of the five leases is approximately $8 million, Lopez said. Of those eight restaurants, Lopez said, three are operating, two are under construction and the remaining three are in the planning stages. Lopez said the fast food category is “exploding,” in part because of what he called “a window (of opportunity) for drive-through windows.” He explained that fast food chains are worried about growing opposition to drive-through windows among city officials throughout Southern California, who are starting to view the windows as potential noise and traffic problems. As a result, any time a fast food restaurant can win a permit for a drive-through window, it builds the restaurant sooner than later to get it completed before city officials change their minds, he said. Plant Sale Crown, Cork & Seal has sold a 202,000-square-foot former canning and bottling plant on an 11.3-acre site at Woodley Avenue and Roscoe Boulevard in Van Nuys to the Van Nuys-based Dunn Family Trust for $8 million, according to Bennett Robinson, a vice president for CB Commercial. Robinson said Crown, Cork & Seal discontinued operations at the building after it was damaged extensively in the Northridge earthquake. Since then, the building has been repaired and is one of the more modern industrial spaces in the immediate area, he said. Dunn Family Trust officials could not be reached for comment on their plans for the building. Bob Howard covers real estate for the San Fernando Valley Business Journal.

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