Macerich Co.’s Westside Pavilion mall could be on the bubble of the great retail shakeout as revenue declines, tenants flee and financial troubles come to a head.
The real estate investment trust’s 767,000-square-foot, three-story shopping center that encompasses several blocks along Pico Boulevard in West Los Angeles has lost Nordstrom Inc. to the newly renovated Westfield Century City nearby. A second anchor store, Macy’s Inc., is slated to close at the end of March while keeping its Westfield Century City location. See related story.
Those departures coincide with a $142 million loan associated with Westside Pavilion going to special servicing in September pending imminent default, according to New York real estate data firm Trepp.
Westside Pavilion is facing many of the same struggles as malls across the country with the migration of retail sales online and a glut of shopping real estate. A report from Switzerland-based financial services company Credit Suisse Group this year estimated that up to 275 U.S. malls, or a quarter of all those in the country, would close in the next five years.
Westside Pavilion’s occupancy slipped to 87 percent this year from 98 percent five years ago, according to Trepp. The firm said it obtained its data from Wells Fargo, which footed the $142 million loan in 2012.
The mall’s lease revenue followed, decreasing to $22.7 million during fiscal year 2016 from $27 million in 2012, Trepp said. The property generated $9.2 million in the first half of 2017.
A spokeswoman for Macerich Co. declined to comment for this story.
Santa Monica-based Macerich was No. 10 on the Business Journal’s list of largest public companies this year with a market capitalization of $8.23 billion as of June 30, 2017.
It owned part or all of 55 shopping centers across the country as of Dec. 31, including five in Los Angeles County and several others in Southern and Northern California, according to its SEC filings.
Westside Pavilion is four miles from Macerich’s Santa Monica Place by the Third Street Promenade, and it’s two miles from Westfield Century City. Westfield Corp. just completed a $1 billion renovation there, expanding the mall’s leasable space from 725,000 square feet, which was smaller than Westside Pavilion, to 1.3 million square feet.
Jeffrey Langbaum, a commercial real estate analyst at Bloomberg Intelligence, said there will be continued demand for higher-end malls, but in areas with more than one shopping center, owners must make changes or shut down. That scenario could play out between Westside Pavilion and Westfield Century City, he said.
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