Redondo Beach Not Sold On Loss of Mall Tenant

0

Last week’s announcement that Nordstrom Inc. will relocate as an anchor tenant from Redondo Beach’s South Bay Galleria mall to Torrance’s Del Amo Fashion Center has suddenly galvanized one ailing mall’s redevelopment plans, left a gaping hole in the other and set off a legal fight between the cities.

The same day that news broke that the upscale retailer was leaving Redondo Beach in 2015, city officials there filed an environmental lawsuit challenging Del Amo’s planned redevelopment, in an apparent effort to slow down or kill the move.

At stake are not only the sales tax revenues and foot traffic directly generated by a major anchor, but also the makeup of the rival malls over the next several years as they compete for high-end tenants and customers.

“Nordstrom means everything,” said Howard Davidowitz, chairman of retail consultancy Davidowitz & Associates Inc. in New York. “The malls that don’t have an upscale profile are getting killed. If you don’t have a Nordstrom or somebody like that, you’re screwed.”

Redondo Beach officials claim that the city of Torrance and developer Simon Property Group Inc. have not properly studied the environmental impacts of Del Amo’s proposed redevelopment, first announced two years ago. Specifically, they allege that Torrance improperly approved a minor modification permit for the first phase of renovation.

Redondo Beach City Attorney Mike Webb pushed back against the idea that Nordstrom was a factor in the filing of the Los Angeles Superior Court lawsuit, pointing out that it is not mentioned in the complaint.

“They’re a neighboring city and it’s designed to make certain that the proper state-required procedures are followed,” he said.

But it could hurt the move because Nordstrom would be opening in a new 138,000-square-foot, two-story building that will be built as part of the first phase of renovations to Del Amo. Other initial redevelopment plans are scheduled to begin next year and finish by 2015.

The loss of Nordstrom also figures to be a blow to sales taxes for Redondo Beach, and a boon for Torrance.

Torrance Finance Director Eric Tsao estimated that Nordstrom’s arrival could alone bring his city around $800,000 in sales taxes a year. Currently, Del Amo accounts for between 8 percent and 12 percent of Torrance’s total sales tax take, which would mean $3 million to $4.6 million of the city’s $38 million in sales tax revenue last year.

“With the news that Nordstrom will be signing a lease with Del Amo mall, we’ll probably see those numbers go up even more,” he said.

Tipping balance

The Nordstrom move could dramatically change the profiles of the two malls and tip the balance in favor of Del Amo, which had been considered aging and in need of a makeover, and away from the smaller Galleria, which has enjoyed a more upscale reputation.

Two years ago, mall operator and 50 percent owner Simon announced it would spend $200 million to redevelop Del Amo, once the largest mall in the country. But it stayed quiet on details. After a presentation in February, city officials and observers were unimpressed by what they viewed to be mostly cosmetic changes and openly wondered if Del Amo would ever get the transformation it needed.

The swiping of Nordstrom and the announcement of further renovations last week, however, have changed minds.

“I’m extremely happy,” said Torrance Councilman Tom Brewer. “This is what I was hoping to see back in February.”

Simon still has not given further details on any renovation that might happen after 2015. Representatives for Simon and Nordstrom declined to comment.

For the 959,000-square-foot South Bay Galleria just three miles away, meanwhile, the loss of Nordstrom threatens the mall’s basic draw. The department store was its major driver of traffic. Without it, mall operators must fill a three-story space to complement remaining anchor tenants Macy’s – which has two stores at Del Amo – and Kohl’s, a lower-end store.

“South Bay Galleria had the leg up to attract the higher-end tenant,” said Bill Bauman, executive vice president at Studley Inc. who has brokered real estate deals in the South Bay. “I think with Nordstrom going to Del Amo, that will switch that momentum.”

The Galleria’s owners have not yet indicated what they plan to do. Jeff Linton, a spokesman for owner Forest City Enterprises Inc., said that the company was disappointed in Nordstrom’s decision and was evaluating options to reposition the mall with a new tenant, but declined to give more details.

“We have some time,” he said, noting that Nordstrom’s lease expires in 2015.

It’s not the first time in recent memory that rival malls have fought over the department store. Last year, developer Rick Caruso convinced Nordstrom to relocate from neighboring rival Glendale Galleria to his Americana at Brand mall across the street.

But for a city to get involved in such a case is rare, said land-use attorney Dale Goldsmith. In the past, most competition between cities over sales taxes took the form of incentives using redevelopment funds, before redevelopment agencies were dissolved by the state this year.

“Cities back in the heyday of redevelopment were competing for high sales-tax generators and offering lavish packages to get the big boxes and auto dealerships,” he said. “But with the demise of redevelopment, that doesn’t happen anymore, and this may be a manifestation of the sometimes cutthroat instincts of municipal politics.”

Staff reporter Jacquelyn Ryan contributed to this article.

No posts to display