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Monday, Sep 25, 2023

Binding Chains?

Caytlyn McCloskey walked into her flower shop one day last April and found an eviction notice.

It told her she had 30 days to pack up her shop, Sea Lily, and leave the Trancas Country Market shopping center in Malibu. The neighboring nursery from which she was subleasing also was getting the boot, all stemming from a dispute over lease payments.

The pending evictions became a flash point for residents who rallied to their support, angry over the waning number of locally owned businesses in Malibu. Now, their efforts have morphed into a much bigger fight: curbing chain stores. The battle is pitting activists in the wealthy city of 13,000 against deep-pocketed developers.

Under community pressure, the Malibu City Council decided last week to begin drafting an ordinance that would limit the number of chain stores in major retail areas. As a starting point, the city is considering capping the square footage of chain stores at shopping centers at 20 percent.

“The community created an uproar and saved us, but all the other independent businesses happen to be dwindling out,” said McCloskey, who ultimately negotiated a new lease. “It’s gotten to the point where we have to take a stance on some sort of legislation so there’s at least a balance of mom-and-pop small businesses.”

The decision by Malibu officials to draft an ordinance came just days after the Los Angeles City Council voted to draft a temporary ban on chain stores in Chinatown in reaction to news that a Wal-Mart grocery store was moving into the neighborhood. That proposal was modeled after so-called formula retail restrictions that gained traction in the wake of a 2003 decision by a California Appeals Court upholding the legality of a formula retail ban in Coronado.

Malibu’s developers and commercial property owners have pushed back against the proposal, criticizing it as government overregulation that would make it hard to lease space. Several big players have commercial property there, including media mogul Jerry Perenchio, St. Louis Rams owner Stan Kroenke and former Playa Vista developer Steve Soboroff.

“There’s no room in any public-policy issues for extremists,” said Soboroff, who is planning a 38,000-square-foot shopping center in Malibu anchored by a Whole Foods grocery that could be affected by the proposed ordinance. “There are good chain stores and there are bad chain stores, and there are good local tenants and there are bad local tenants. What Malibu should be looking at is good tenants, not saying somebody’s good because they’re local.”

Sleepy shopping district

Despite the intensity of the dispute and the big names involved, Malibu’s shopping centers are quite small. The city may be a high-profile destination with an estimated 13 million visitors a year, but most don’t come to shop.

Of the five largest shopping centers that potentially would be affected by the proposed ordinance, only one, Kroenke’s Malibu Colony Plaza, is more than 100,000 square feet. Together, the leasable square footage of those five centers is about half of that of the Grove in L.A.’s Fairfax district.

This is due in part to Malibu’s historically unfriendly stance toward commercial development. There were no new retail centers for a 20-year period until the 2009 opening of the Lumber Yard in downtown Malibu – and that was only made possible after several concessions by the developer to rent at least 10 percent of the space to local shops at a discount.

Last year there was grumbling when the Malibu Village shopping center in downtown was sold to a group led by Matt Khoury of Beverly Hills real estate firm KRE Capital LLC after undergoing a $4 million renovation. The new owners have signed several national tenants, including cosmetics seller Sephora and fast-food chain Chipotle. Residents blamed the new Sephora for the shuttering of a local beauty supply shop. More than half of the complex’s square footage is now taken up by chains, the highest percentage in a recent survey by the city.

Then there was the ownership transfer of the Trancas shopping center, where the battle over McCloskey’s flower shop and the neighboring nursery took place. After several months, a public relations firm announced that the new owners were Paige and Bo Dubbert. Paige Dubbert is the granddaughter of James “Bud” Walton, one of the founders of Wal-Mart Stores Inc. – and the niece of Kroenke, whose wife, Ann Walton Kroenke, is also a Wal-Mart heir. The connection to the big-box retailer drew suspicions, exacerbated by news that the owners would be doubling the size of the center and adding parking lots.

The eviction threat against the flower shop and nursery galvanized a group calling itself Preserve Malibu, which held rallies and gathered signatures. Even celebrity residents such as Martin Sheen dropped by to lend support.

Once the nursery and the flower shop were kept open, the fight quickly turned into something larger. How to save local businesses in the long haul?

“Our strategy was not to lose another business,” said Cindy Vandor, a local resident and member of Preserve Malibu.

Good idea?

The Malibu proposal is for a “commercial diversification” ordinance that would limit chain stores, defined as stores with 10 locations or more, to no more than 20 percent of a shopping center. The group wants to further regulate the tenant mix by capping any specific use to 30 percent; for example, restaurants could not take up more than 30 percent of a shopping center. But activists also are calling for every shopping center to dedicate at least 20 percent of its space to restaurants and service businesses that serve local residents.

They claim to have gathered thousands of signatures in support, and last week packed City Council chambers to lobby for the ordinance. In response, Malibu officials ordered staff to begin drafting an ordinance limiting chain stores and to study its possible effects.

The ordinance, which likely won’t be coming before the City Council until late summer at the earliest, is expected to affect all retail in the Trancas area in west Malibu and the Civic Center area of central Malibu, where most of the major shopping centers are located, said Planning Director Joyce Parker-Bozylinski. The Civic Center area also has vacant lots where major commercial development is expected to occur in the future, including a retail project called La Paz, which would be one of the largest in Malibu at 112,000 square feet.

Developers have indicated they are open to the idea of committing 20 percent of their space to restaurants and service businesses. But they have opposed most of the other proposed restrictions and have countered with alternative proposals, including local hiring programs and a commitment to give local businesses preference.

“The selection of tenants should be a process of people’s purchasing patterns,” said Michael Koss, who owns the Malibu Country Mart in downtown Malibu. “This is what free enterprise is all about. This type of intrusive regulation results in reduced home values and inferior retail choices.”

John Fransen, a consultant in Newport Beach, said retail bans are hardly revolutionary. They were first adopted by Carmel in the 1980s, and later by other California cities, including Coronado and San Francisco. They are now under consideration in Sonoma and Richmond.

“There was a flurry of those and then it went quiet,” Fransen said. “Now that the economy is turning, are they becoming more aggressive again? I’m not sure. They seem to be very selective situations.”

He also said that some of the ideas being looked at in Malibu, such as controlling tenant mix by percentage, are radical.

“Let’s say you’re a shopping center owner and 20 percent of your space is going to turn over in the next year. You put up a sign, go into the marketplace and come back with a tenant, but you’re not meeting one of these quotas. Now what do you do, do you hold it vacant? The city would be better off just buying the shopping centers and being the landlords,” he said.

However, the biggest supporter of the ban who’s on the City Council, Pamela Conley Ulich, likened the grassroots movement to the protesters who occupied Wall Street last year: local residents who simply have had it with the city’s development.

“It’s kind of like Occupy Malibu,” she said. “It’s the 99 percent of the people standing up and saying, ‘That’s enough.’”

But Ulich will be termed out by the time an ordinance would be voted on, and activists said they’ll keep fighting if it’s turned down by the council, with a ballot measure as an option.

“This is all about the future of Malibu and what’s best for the retail sector, the local economy and residents,” Vandor said.

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