The owner of Santa Monica Place has shelved its controversial redevelopment plans until Federated Department Stores Inc. determines whether it will shutter one of the mall's two anchor stores.

Federated, the surviving entity after the mega-merger with May Co., operates the Macy's and the Robinsons-May stores at Santa Monica Place, owned by Macerich Co. That overlap has led Federated to put the site on a list of stores in the L.A. region that could be closed.

Retail consultants and Santa Monica elected officials believe Robinsons-May could shut its doors within the first three months of next year. "From everything that I've heard, it's going to happen," said Rob York, a retail consultant at Santa Monica-based Fransen Co.

Randy Brant, a Macerich senior vice president who overseas Santa Monica Place, said Federated hasn't notified the company of a final decision. He said Macerich is waiting to find out the fate of the store before proceeding with its redevelopment planning.

"Macerich is weighing all of the options," he said. "We are studying all the potentials based on what may happen with Federated and what the city might approve."

Macerich already knows what won't fly. A public outcry forced the company to retreat from plans it announced a year ago to raze the 560,000-square-foot mall and build an open-air lifestyle center with three 21-story residential towers in its place.

The Santa Monica City Council agreed to work with Macerich on brokering a compromise with community groups. For nearly a year, Santa Monica community groups and elected officials met with Macerich executives and drew sketches, in some cases with crayons, of what they would like to see at the site.

Much of that work could now be out the window. Instead of tearing down the mall, Macerich is considering an extensive renovation of the property. That could include removing the enclosed mall's roof, according to sources briefed by company officials. Macerich, which is based in Santa Monica, would also carve out about 85,000 square feet for new corporate offices.

However, the structure of the mall would be left essentially intact. That would make connecting the Third Street Promenade through the mall to Colorado Avenue unlikely.

"If we can't come up with an economic model that makes sense, if the project doesn't offer returns that make sense, then we are going to have to look at more of a remodel of the existing facility," Brant said in an earlier interview.

If the Robinsons-May store closes, Macerich could be presented with new development opportunities at Santa Monica Place and may not need to replace the department store.
Development options

The company could redevelop the site for a new anchor tenant or scrap having a second anchor altogether in favor of building housing. Macerich could lease the site to another department store or break it up into dozens of specialty stores.

"With Macerich owning that piece of the mall, it is a substantially different opportunity than if somebody else owns it," said Richard Bloom, a Santa Monica councilman.

The only option Federated has ruled out, according to York, is opening one of its Bloomingdale's units at the site. Federated has Bloomingdale's stores in Century City and in the Beverly Center and the company needs more spacing between locations than the chain would have in Santa Monica.

York and others briefed by Macerich believe the more likely scenario is that the site will go to a competing department store operator. "There is considerable interest from Federated on both a legal and public relations strategy to make these spaces available to competing entities," York said. "They have a very significant market share after the merger."

When Santa Monica Place was built in 1980, developer Rouse Co. sold one anchor store for a Broadway department store and inked a long-term lease to Robinsons-May. In the early-1990s, Broadway was purchased by Federated, which converted the Santa Monica Place site into a Macy's.

Sales at Santa Monica Place have been declining steadily since 1998, when the mall generated $1.6 million in local sales tax revenue, which equals 1 percent of total sales. In 2004, the most recent year for which figures are available, Santa Monica Place generated $1.1 million.

Talks with Nordstrom
Macerich bought Santa Monica Place for $130 million in 2000, with the goal of reinvigorating the property. But so far the company hasn't been able to stop the declining sales. To renew interest from shoppers, Macerich may want to bring in a new department store, and already there have been discussions with Nordstrom Inc., according to sources briefed by Macerich executives.

While Nordstrom has a store at the Westside Pavilion, also owned by Macerich, York believes the company wouldn't be affected by a Santa Monica location. "With the depth of Nordstrom customers on the Westside, I think the impact would be fairly small," he said.

The possibility of Nordstrom taking over the site has some Santa Monica residents uneasy. Robinsons-May, they say, was one of the few remaining department stores in Santa Monica that sold affordable merchandise. "A lot of people feel we need stores that serve the population of the city that can't afford to shop in trendy expensive stores," said Ken Genser, a Santa Monica councilman.

Others, however, disagree. "Nordstrom would be a great addition to our retail mix," said Kathleen Rawson, executive director of the Bayside District Corp., a non-profit group that markets the city's business district.

*This story will be available in the Dec. 5 edition of the Business Journal.

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