What do a ballroom, a stage theater, loft apartments, and a movie theater fitted with dinner tables have in common?

They’re anchors in retail projects under development in Los Angeles.

Creativity and experimentation are alive and well these days as developers try to reinvent the mall amid a highly saturated retail market and scarce financing.

How these projects come together matters more than ever to developers and retailers alike. Old ideas are recycled anew in the ever-shifting scene, and several forces are coming together to make life difficult for developers. “There is no real cookie-cutter approach, whether it’s Cinerama Dome Entertainment Center or a power center in Anaheim,” said Neil Haltrecht of Pacific Theatres Realty Corp. “It’s really a matter of customizing to the market and to the consumers in the area.”

The entertainment retail center, once a hot concept, has suddenly fallen into disfavor. Bankrupt theater chains such as General Cinemas are expected to cull much of their local stock, cutting into foot traffic at malls across the region. Department stores are still struggling to reinvent themselves. So-called big-box stores are being met with increasing opposition from neighbors.

The trend toward infill development, where existing properties are recycled into other uses, is bringing about large-scale changes in Los Angeles. Here, consumer spending patterns are strong and city officials are often eager to accommodate retail development, at least partially due to the rich taxes such projects generate.

All these factors, and more, are driving a new wave of upscale, street-oriented projects all over the county.

But far from being the cookie-cutter retail centers of the past, today’s new projects are distinctive and a cultural and physical connection to the surrounding community.

“Every community wants its own sense of pride, their own village and community place,” said Howard Wong, a retail consultant with Jones Lang LaSalle.

That may seem ironic when Target and Wal-Mart and others are aggressively moving into L.A., but in population-dense areas, projects need support from the locals as much as they need creditworthy tenants.

That takes the ever-growing trend toward street retail to a new level. New developments in Hollywood TrizecHahn Development Corp.’s Hollywood & Highland project and Pacific’s Cinerama Dome Entertainment Center both are oriented to the street. Douglas Emmett & Co. is opening up the Sherman Oaks Galleria to the streets. Capital Vision Equities hopes to carve out a retail streetscape where Santa Barbara Plaza now stands. TrizecHahn is busting Plaza Pasadena open to the sky, hoping to create an urban village in that city’s downtown.

“Most retailers, from high-end boutiques to chains, want to be on the street,” said Wong. “They don’t want to be in the malls. They want the village. Companies like the CIM Group that do nothing but street retail are finding that large national chains are coming to them looking for multiple street locations.”

And what they’re offering is different. The saturated retail market in L.A. leaves little room for product that is not unique and well-positioned.

“A lot of stuff has already been built,” said Haltrecht of Pacific Theatres. “You have to be careful what you’re building now to make sure it’s filling a need in the market. Now you have to pay more attention to all these details in your environment. Developers have to be very careful with the retailer they’re going with, to make sure the retailers can succeed.”

No formulas

Many developers say they’ve cast aside formulas that insist upon certain combinations of retail anchors. Instead, they’re taking a more mixed approach.

– TrizecHahn’s Paseo Colorado in Pasadena includes loft-style apartments where a department store once stood. The Hollywood & Highland project includes a ballroom.

– Live theaters are going into both Hollywood & Highland, and into developer Mark Siffin’s massive Sunset Millennium in West Hollywood, a hotel/retail/office project on Sunset Boulevard.

– J.H. Snyder Co.’s plans for a Gelson’s market in Beverly Hills includes office space.

– In the new Burbank Empire Center, Sears will introduce its Great Indoors concept store, the first one in the L.A. area.

– Pacific Theatres Realty’s latest project in Pasadena, tentatively called Stats on the Green, will introduce Pacific’s upscale ArcLight Cinemas product, movie theaters with reserved seating. One theater will have roughly 75 leather recliners next to dinner tables.

Lee H. Wagman, president of TrizecHahn, is among a growing number of developers who say that in today’s market, the only rule is that the project be unique. After that, it’s a question of solid real estate fundamentals, such as a good location and strong demographics.

“A lot of people are hanging onto the formulas they know,” Wagman said. “We’ve decide to play a major role in urban redevelopment. Where’s the growth going? What’s the next trend? We’ve come back the other direction.”

He views the Hollywood & Highland project as a uniquely tailored development that connects with the streets around it, magnifying the life of the surrounding city, feeding off its currents and contributing to the “urban fabric” rather than creating a separate space in which to escape.

Hollywood & Highland is huge costing close to $600 million for a 650,000 square-foot project, plus a 650-room hotel. It has movie theaters and restaurants, instead of department stores or big-box stores, and a ballroom where the Academy Awards Governor’s Ball will be held. Also, it has studios, a hotel, and a live theater set to host the Oscars.

It’s uniqueness is what will make it succeed, Wagman said, because the numbers are there.

“You have the potential with a project like Hollywood & Highland to magnify the city by many, many times,” he said.

A track record

TrizecHahn has succeeded in the past. Its Horton Plaza triggered the revitalization of downtown San Diego in the 1980s during a time when the company was the quintessential mall developer. But in 1998, with department stores consolidating, TrizecHahn moved to sell off many of its mall holdings and speculate on infill redevelopment instead a less competitive niche, Wagman said.

Still, there are limits. TrizecHahn’s strategy is a risky one and its stock has dropped as a result, said Greg Andrews, an analyst with Long Beach-based Green Street Advisors Inc.

“It is a company in transition, and it’s being viewed as such, with a fair amount of skepticism,” Andrews said. “There’s a certain amount of uncertainty.”

Significantly, street retailing specialist CIM Group swept in starting in 1998 to buy up properties along Hollywood Boulevard and develop in the shadow of TrizecHahn. When TrizecHahn went into downtown San Diego, CIM Group was there, too, revitalizing the downtown around it.

For John Given, senior vice president at CIM Group (which also happens to be the largest property owner on the Third Street Promenade in Santa Monica), development today is a matter of taking the business practices used in malls and using them where people want to shop on the street. It entails managing the tenant mix and adding services such as security, covered in Hollywood by the Hollywood Business Improvement District. “Hopefully we’ve found a good meld between the two,” Given said.

Another crucial factor for CIM: city buy-in. If the city isn’t backing the project wholeheartedly by doing things such as offering publicly financed parking, as it did in Hollywood and Pasadena, CIM isn’t interested.

In addition, physical icons, cultural history, and 24-hour uses are needed to make a streetscape concept work, and this isn’t possible everywhere, Given noted.

It doesn’t always need to be, either. There are plenty of malls such as Del Amo and Glendale Galleria whose locations and strong tenant mix allow them to continue performing at a very high level.

Malls such as Glendale Galleria and Lakewood Center Mall are going through major renovations to keep people coming back. But some indoor malls have had to completely reinvent themselves.

For example, the nearest competition to Caruso Affiliated Holding’s The Grove, set to open in 2002 in the Fairfax District, is the Beverly Center (now undergoing renovations) and the Beverly Connection (where General Cinemas and Strouds are both in bankruptcy). Both will need to reposition or suffer, Wong said.

“The negative impact is always going to be impacting the existing retail complexes that are outdated, either by tenant mix or by the physical nature of the complex,” Wong said.

Some malls just couldn’t do it.

Valley mall Sherman Oaks Galleria will soon be transformed by Douglas Emmett into a 700,000-square-foot office complex with 300,000 square feet of retail and a 16-screen Pacific Theatres multiplex.

There’s only so much that can be done with indoor malls. The novelty has worn off, said Henry Madrid, a partner at real estate consulting firm Kosmont Partners Inc. But the popularity of street retail could very well be a trend.

“Possibly in 30 years, centers will be enclosed again,” Madrid said.

But retail specialist Given insists that the 40-year stretch when indoor malls dominated was an aberration, a period when shoppers had “amnesia” about their historical preference for shopping on the streets.

Retailers have become more unconventional about making the best use of limited space in Los Angeles. Examples abound: a two-story Target above a single-story Best Buy in J.H. Snyder’s West Hollywood Gateway project, a two-story Home Depot at Sunset Boulevard and Western, and a two-story Wal-Mart in Panorama City.

“If you’ve never seen grocery carts going up and down an escalator, it’s an interesting education,” said Dick Carter, a retail tenant broker at Centers Business Management.

The demand from major retailers for a piece of L.A. should help troubled shopping center owners facing a need to reposition, said Sandy Sigal of Tarzana-based Newmark Merrill Cos., which specializes in helping shopping centers reposition.

But retail landlords will need to do more than merely put in new tenants.

“Have some vision. Be willing to tear down some space. The last thing the typical building owner wants to do is tear down space,” Sigal said.

“Our job is to say to them, ‘I know you’ve got a half-million square feet, but it’s not achieving its maximum value. You’ll get far more value if it was 300,000 square feet.'”

Major chains such as Target, Wal-Mart, Cost Plus and Ralphs are moving into West Hollywood and even South Central Los Angeles. If property owners are willing to be realistic about what their properties are worth, there’s plenty of demand from tenants that cannot expand much farther in suburban areas.

“For good demographics, there are definitely tenants who are eager,” Sigal said. “A lot of tenants don’t want to wait for new homebuilding. They’ve gotten a little more unconventional about their sizes or what they’ll take.”

But the shadow cast over retail by the problems with movie chains has dried up financing for those seeking to acquire or reposition retail centers anchored by theaters.

“It pretty much grounded to a halt,” said Paul Brindley of commercial mortgage brokerage Holliday Fenoglio Fowler LP. “Now, you can’t even get phone calls returned because of that.”

Andrews notes that the stocks of retail-oriented real estate investment trusts such as L.A.-based Westfield America and Santa Monica-based Macerich Co. have underperformed those of other types of REITs. The reason? Investors sense that retail spending is slowing.

In addition, the Los Angeles County Economic Development Corp. reports that $459 million is expected to be pumped into building and renovating L.A. retail centers in 2000, up from $408 million in 1999 and $368 million in 2000. That’s shy of the $500 million-plus spent yearly during the late 1980s, but today the market is more developed.

“Most retailers have had tremendous pressure from Wall Street to grow rapidly,” Andrews said.

But at some point, that expansion can’t go on.

“The extent of saturation of retail is tremendous,” Andrews said. “It’s a business where a good idea gets beat to death and has to get reined in.”