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VILLAGE DELUXE

Center gets retailers befitting wealthy Manhattan Beach surroundings

By Brad Berton

Madison Marquette says building improvements and new tenants have doubled sales per square foot at Manhattan Village since it bought the property in late 2000.

Madison Marquette has big ambitions for Manhattan Village, a 551,847-square-foot community shopping center in Southern California’s wealthy Manhattan Beach. But executives at Cincinnati-based Madison Marquette see themselves as idesally qualified for the job of adding value to the 20-year-old property, given that the firm has made a specialty of creating typically higher-earning lifestyle centers.

The company has made a good start. Since buying the center in late 2000 and launching a two-phase, $50 million-plus renovation and repositioning program, Madison Marquette says it has doubled sales to more than $400 per square foot.

Madison Marquette’s vision is to retain and enhance Manhattan Village’s highly productive community elements — including grocery, drugstore, electronics category-killer and several restaurants — while sharply boosting revenues in the enclosed portion.

The primary solution is a higher-end mix of tenants. Steve Plenge, the company’s senior vice president and director of acquisitions says he wants the most refined tenant roster available at the center, which sits on 43 acres just south of Los Angeles International Airport.

Underlying Manhattan Village’s prospects is its location within a densely built-out, high-income trade area that Plenge says is underserved. The site is in a highly desirable part of the Los Angeles area’s South Bay. The median home price in Manhattan Beach is a whopping $850,000, according to the California Association of Realtors’ latest report.

The greatest opportunity to add value, the developer said, lies within the center’s 289,305-square-foot enclosed portion, which includes about 40 shops, totaling 113,251 square feet between anchors Macy’s and Macy’s Men’s & Home. (While Macy’s owns its anchor site, the Macy’s Men’s & Home is on a long-term lease.) Plenge said he expects to bring in new tenants in roughly half the in-line space in the course of the renovation.

Various tenants are out already, including several that had been on short-term leases. Soon to take their places, or already in, are Ann Taylor Loft, Chico’s, Godiva Chocolates, Origins, Pottery Barn Kids, Tacone Café, Talbots, White House/Black Market and Williams-Sonoma.

Madison Marquette is also hoping to attract such tenants as Corner Bakery, Smith & Hawken and Tommy Bahama during the renovation’s second phase, which involves replacing an old Tequila Willie’s restaurant with a pair of structures slated to become a “paseo”-type entrance (specifically, a winding or curved walkway flanked by stores) to the enclosed mall.

Madison Marquette aims to get all the tenants up and operating by early next year as crews finish up the second phase. The first phase — common-area upgrades, new entranceways and replacement of an old food court — was completed over the summer. The work entails a small amount of net new gross leasable area (GLA), amounting to barely 15,000 square feet, as well as alteration to existing building structures.

Outside the enclosed-mall area, there wasn’t a whole lot that needed fixing when Madison Marquette plopped down nearly $90 million to purchase the non-Macy’s portion of the property (424,112 square feet of GLA), which was jointly owned by The Macerich Co. and an institutional investor. Peripheral pads house a Ralphs supermarket, Fry’s Electronics, Sav-on Drugs and a Pacific movie theater, along with clusters of eateries, half a dozen banks and even a medical office building.

“Our Ralphs, Sav-on, Fry’s and Macy’s are all very productive,” Plenge said. A new Chili’s restaurant is opening near the high-volume Ralphs.

The interior common areas saw important improvements (new flooring, improved graphics and seating areas, and new carts and kiosks), but much of the architectural strategy focused on the mall entrances.

“One big criticism is that shoppers had trouble finding the entrances,” which were “dark and uninviting,” Plenge explained. The new design features larger doors and windows, complemented by beach grasses, gas-lamp replicas and wood-louvered awnings.

Seattle-based Callison Architecture, whose other retail improvement projects in the state include Beverly Center, Beverly Hills and the expansion of South Coast Plaza, Orange County, was brought in for the remake.

According to George Wickwire, the Callison partner who helped plan the renovation, the old, unattractive entryways and limited natural light made Manhattan Village less than appealing to the trade area’s upscale shoppers and higher-end merchants. Wickwire incorporated elements native to Manhattan Beach and the surrounding area. One technique involved varying the interior lighting à la a typical day at the beach, accomplished by means of the larger main entries and the addition of a new 2,500-square-foot clerestory skylight. The native beach grasses generate additional local color, Wickwire said.

Creating a truly lifestyle environment at Manhattan Village also meant “getting rid of the ‘B’ stuff,” especially the cliché food court, in favor of higher-end shops and scattered eateries, he said.

Though it’s tough to uncover this kind of repositioning opportunity today in a trade area as attractive as that of Manhattan Village, the L.A. region does offer a few “select opportunities” to upgrade merchant mixes, according to Christopher Stirling, a locally based senior vice president at Seattle-based investment advisory firm Kennedy Associates Real Estate Counsel.

As seems essential when any development is proposed in California these days, Plenge and other Madison Marquette representatives discussed the plans extensively with neighbors, homeowner associations and city officials. That helped make the formal approval process relatively painless by regional standards, Plenge said. The meetings revealed that many community interests see the renovation as a chance to further boost the prestige associated with Manhattan Beach and other wealthy nearby communities, he explained. The “triplet” Manhattan/Redondo/Hermosa beach cities that define the South Bay waterfront are crying out for more retail excitement, he added.

The trade area’s favorable demographics and scant likelihood of significant future competition makes the center very attractive to potential lifestyle tenants, Plenge said. Average household income within a mile of the property exceeds $150,000. And the built-out nature of the South Bay’s oceanfront communities tends to minimize the potential for additional large-scale retail development.

“A lot of tenants have been telling us about their desire to be in this market,” Plenge said.

Nor does it hurt that the property’s northern boundary is bustling Rosecrans Avenue, which also serves as Manhattan Beach’s border with revitalizing aerospace mecca El Segundo. As the South Bay recovered from its severe recession of the early 1990s, Rosecrans Avenue has seen a continuing wave of commercial development that has upgraded the avenue to “corridor” status.

Thus, as Manhattan Village’s community-type anchors keep attracting upscale residents seeking groceries, drugs and related staples, high-end merchants see strong prospects in the upgraded mall. It also helps that Madison Marquette has developed strong relationships with many of the nation’s lifestyle-type retailers, Plenge said, adding that the firm’s track record with similar renovations inspires confidence in its ability to capture Manhattan Village’s unrealized potential.

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