Galaxy Missing Hollywood Revival
By DARRELL SATZMAN
A mere city block separates the retail center everybody is talking about from the one nobody talks about.
While the newly opened Hollywood & Highland draws the media spotlight and crowds of curious shoppers, the long-struggling Hollywood Galaxy sits largely ignored, as always.
A plan to overhaul the struggling complex is being waylaid by the bankruptcy of its anchor tenant, General Cinema Theatres Inc., which has yet to file a reorganization plan even though it has been operating under Chapter 11 for more than a year.
Meanwhile, one-fourth of the 120,000-square-foot Galaxy sits empty including half its ground-floor space. Despite interest from potential new tenants, long-term leases can't be inked until the fate of General Cinemas' six-screen cineplex is resolved.
"It's causing us some problems. Obviously it's better to have rented properties," said Avi Shemesh, a partner with Galaxy co-owner CIM Group. "We can't finalize leasing plans until we know what's going to happen (with General Cinema)."
Such uncertainty reflects the stutter-step nature of Hollywood's much-promised renaissance. While the Hollywood & Highland complex is seen as a catalyst for the area's retail revival, there are no guarantees that tourists and locals will venture much past that immediate intersection certainly not in the near-term, given the still-seedy shops along much of Hollywood Boulevard.
Or, in the case of the Galaxy, a half-empty complex.
"The Galaxy is really the beginning of the tourist area in Hollywood," said Kerry Morrison, executive director of the Hollywood Entertainment District Property Owners Association. "They need to find the right design and the right mix of retail and entertainment to draw people from Hollywood & Highland."
While it's unclear whether General Cinema will be able to fulfill its lease at the Galaxy, which doesn't expire until 2010, Shemesh said he expects the situation to be resolved by yearend. General Cinema officials would say only that no decisions have been made about the location.
Shemesh said he is not overly concerned about the forgone rent because the complex once renovated would be well positioned to thrive for years to come. The Galaxy has four floors of underground parking nearly 700 spaces that continues to generate revenue.
"The most valuable component of that project is the parking," said Leron Gubler, president and chief executive of the Hollywood Chamber of Commerce. "The fact that it's only a block away from Hollywood & Highland puts it in prime territory."
Nevertheless, with pedestrians swarming Hollywood Boulevard to get a first look at Hollywood & Highland and the holiday shopping season shifting into high gear, the Galaxy is missing a prime opportunity.
"Bankruptcies are really bad for landlords," said Chris Bonbright, chief executive of commercial real estate firm Ramsey-Shilling Co. "There's nothing they can do until this is settled."
Started by Shemesh and fellow Israeli Shaul Kuba in 1995, CIM made its name developing retail space in up-and-coming areas like Third Street Promenade in Santa Monica, Pasadena's Old Town and the Gas Lamp District in San Diego. "They have a very good track record and they are very astute about what the customer wants," Bonbright said.
CIM has its work cut out for it with the Galaxy.
Billed as the catalyst for a Hollywood renaissance of another era, the Galaxy opened to much fanfare almost 10 years ago to the day only to run into financial problems that were due in part to its pedestrian-unfriendly design.
The $48 million retail and entertainment complex was built by Kornwasser & Friedman Shopping Center Properties and originally intended to complement a planned $200 million center at Hollywood Boulevard and Highland Avenue known as Hollywood Promenade. That project never made it off the drawing board.
"It was the wrong project at the wrong time," Gubler said of the Galaxy, pointing out that the complex opened just as the worst of the early-1990s recession was taking hold. "There was nothing on the street level, nothing to pull people in and, as a result, it struggled from the beginning."
Bonbright was more blunt.
"It's one of the most poorly designed projects I've ever seen," he said.
Among other problems, a food court located below street level was a ghost town. Businesses at street level were obscured by an imposing central fa & #231;ade.
CIM purchased the Galaxy in partnership with Federal Realty Investment Trust of Maryland in 1998 for "less than $24 million," Shemesh said. The purchase was part of a $50 million string of Hollywood acquisitions made by CIM, including the former Petersen Publishing building which is next door to the Galaxy and The Woolworth Building at 6410 Hollywood Blvd.
Besides General Cinema, current Galaxy tenants include the Hollywood Entertainment Museum which replaced the food court on the lower level a Tower Records clearance store, a shoe store and an L.A. version of New York's Knitting Factory jazz club.
CIM officials de-clined to reveal the rent they're getting at the Galaxy, but local real estate agents said it's between $3 and $4 per square foot, monthly, compared to $5 to $7 a square foot at Hollywood & Highland.
Turning the corner
Since the Knitting Factory opened last year, business at the club has been just so-so, said Michael Dorf, chief executive of club owner KnitMedia Inc. But his hopes remain high for the two-stage music venue, restaurant and bar.
"We've been waiting for the opening of the Hollywood & Highland complex to show us what the potential is for the whole neighborhood," Dorf said. "The location will be judged over the next couple of months."
Despite being handcuffed by the General Cinema situation, Shemesh remains optimistic about the Galaxy's potential. But the theaters remain the key question, because redesigning the complex will depend on what is occupying that space.
And though Bonbright suggested that CIM "might just want to scrap the complex and keep the parking," Shemesh said the envisioned overhaul is less drastic.
"The important thing is we are committed to the area," he said. "We know we bought a white elephant, but we're going to take advantage of it."
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