Monday, Dec. 22, 1997 | 11:04 a.m.
Southern Nevada's growth and tourist-fed malls are veritable gold mines and appear to be dodging national trends threatening the concept of the traditional regional mall.
But two will be put up for sale early next year in another instance where cash-rich real estate investors will likely pay a premium price to owners ready to move to new investment horizons.
Both the 19-year-old Meadows Mall and the 29-year-old Boulevard Mall will go on the block next month. In both cases, it's not a matter of current owners bailing out on Las Vegas; it's offshore owners that are taking on new strategies and selling their local properties as parts of massive packages worth hundreds of millions of dollars. Depending on size, tenant situation and location, regional malls can sell in the $100 million range.
Kit Graski, who studies suburban Las Vegas retail trends for CB Commercial, said The Boulevard and Meadows appear to be in good health.
"The Boulevard has been expanded and Meadows recently was revamped," said Graski. "Both of them have virtually no vacancies."
Dallas-based MEPC American Properties, which operates the Boulevard Mall, has hired Goldman Sachs of New York to advise it on prospective buyers for its $1.1 billion portfolio, which includes 13 million square feet of space in regional shopping centers, office buildings and industrial developments nationwide.
Chan Chandler, a spokeswoman for MEPC American, said about 70 percent of the portfolio is in retail holdings including properties in Atlanta; Dallas; Los Angeles; New York; Washington D.C.; Jacksonville, Fla.; San Antonio, Texas; Minneapolis, Minn.; and Bakersfield, Calif.
Each regional mall in the portfolio has been renovated or is undergoing renovation. One is the Northridge Fashion Center in Southern California, which was virtually rebuilt after the 1994 earthquake.
MEPC American's parent company is London-based MEPC plc, which is selling its holdings in the United States and Australia to concentrate on operations within the United Kingdom.
The Meadows Mall sale has similar circumstances. When it hits the market next month, it will be part of package of six properties offered by New York-based ERE Yarmouth, whose parent company is Lend Lease Employer Systems, an Australian administrative services corporation. ERE Yarmouth manages the malls for Usppi, a $600 million private company of investors that owns the malls.
Lend Lease serves one in seven Australian employees and provides payroll and human resource services and computer software.
Rob Stuart, an associate in ERE Yarmouth's Atlanta office, said the impending sale is being timed to take advantage of hungry real estate investment trusts.
In addition to the Meadows Mall, the Usppi package includes the Landmark Mall of Alexandria, Va.; the Mayfair Mall of suburban Milwaukee; Northgate Mall in Chattanooga, Tenn.; the Oglethorpe Mall in Savannah, Ga.; and Park City Center in Landcaster, Pa.
Jonathan Miller, a senior vice president with ERE Yarmouth in New York, said the issue isn't a lack of confidence in Las Vegas, but is a general portfolio decision.
"Las Vegas has had strong growth and business growth is quite good," said Miller. "Usually, retailing follows along. The issue for Las Vegas is the amount of growth and how well planned it is and whether there's too much too fast. It (the sale) has no bearing at all on that."
Most top-tier malls nationwide are doing well, but institutional investors are backing away from older regional properties because of a fear of overbuilding. While The Boulevard and Meadows are faring well in Southern Nevada's thriving economy, they both fit the definition of mature properties being the oldest regional malls in the area.
Among the real estate investment trusts expected to bid aggressively for the estimated $2.6 billion in mall properties that will come on the market in packages similar to the ones offered by MEPC and ERE Yarmouth are groups led by Simon DeBartolo Group Inc. and General Growth Properties Inc.
Simon DeBartolo already operates The Forum Shops at Caesars.
Another prospective bidder: the Rouse Co., which through the Howard Hughes Corp., owns the Fashion Show and is looking to build a 1-million-square-foot regional mall in the Summerlin area. Last month, Rouse's board of directors authorized its management to convert itself to a REIT for the tax year beginning Jan. 1. The company said it has received a favorable ruling from the Internal Revenue Service to operate as a REIT, giving the company new financing options for expansion.
While local analysts point to the vitality of local malls, upcoming expansion efforts at Fashion Show, recent makeovers and expansion at The Forum Shops and Meadows and the prospect of another mall at Summerlin, the national picture isn't as rosy.
Barbara Ashley, senior vice president of retail services for the Michigan-based Taubman Co., said in recent years the amount of retail space per person in the United States has nearly doubled to about 19 square feet per person.
Writing for the Center for Retailing Studies at Texas A&M University, Ashley said malls have a viable future despite some of the emerging competitive problems on the horizon.
"Clearly, not all shopping centers will survive," said Ashley. "But, as some older and smaller malls disappear, one or two destination shopping centers will rise to dominate each market."
Malls will continue to thrive, she said, because specialty stores are dependent upon them. While entertaining formats are key to many of the emerging specialty stores, Ashley dislikes the term "entertainment retail."
"I don't like it because its focus is much too narrow," said Ashley. "Sometimes, it's about entertainment, but more importantly, it's about an enjoyable, pleasurable, amusing or memorable experience -- something that makes people feel so good when they go into a store that they're eager to return."
She cites some of Las Vegas' newest retail standouts as examples -- the Warner Bros. and Disney stores and NikeTown. Disney has a presence in the Boulevard, the Fashion Show and the Forum Shops while Nike Town opened its doors less than a month ago in the new Atlantis wing of the Forum Shops.
Southern Nevada's local mall managers agree that while the competition is getting stiffer in Las Vegas, they see good times ahead.
"People enjoy shopping, they like seeing and being seen," said Bob Touma, general manager of the Boulevard, the city's largest mall with 1.2 million square feet.
Touma looks at the rising popularity of online shopping as a potential plus for malls.
"We find that computer-literate tourists are planning their trips before they come," he said. "They're especially looking to see what's going on before they plan an itinerary."
Touma is not worried that buyers will actually make purchases online, noting that people "still want to see, feel and touch the merchandise."
"You can't shop for perfumes when you're on your computer," added Alan Schmiedicker, general manager of the Galleria at Sunset, Southern Nevada's newest mall.
Galleria's second Christmas season has been successful and Schmiedicker said a lot of that can be attributed to the arrival of competitors and other attractions to add visibility to the mall.
"The opening of Sunset Station has helped us quite a bit," said Schmiedicker. "Plus, we're still a new mall. A lot of the trends you see affecting the older malls don't apply to us."
Although it's a mature mall, Meadows still has room to grow, which should help it stay viable, said general manager Frank Wheat.
"The competition is growing," said Wheat, "but so are the residential areas. There are more consumers who want quality as well as value."
Ashley said one of the challenges facing regional malls nationwide is the philosophy of anchor tenants to develop fewer, larger stores in their markets. Many malls can't accommodate those needs, resulting in pullouts and relocations.
Wheat said the Meadows still has room for expansion, such as when Dillard's grew in the 1995 Meadows renovation.
"We can reangle and restripe the parking lot to accommodate the number of parking spaces we would need in an expansion," said Wheat.
The Forum Shops, which has kept quiet on its Phase III expansion plans, and Fashion Show, which plans to add two anchor stores and an additional 200,000 square feet of small store space to the existing 855,000-square-foot center, are more dependent on the tourist trade because of their Strip locations.
The Forum Shops boast sales per square foot of between $1,200 and $1,400, the highest in the nation, while Fashion Show reports its sales at twice the national average at more than $500 per square foot. The other malls would not issue sales statistics, although Galleria reported sales up between 12 and 15 percent over last year.
Rouse officials wouldn't comment further on development plans of its Summerlin mall. When plans were announced earlier this year, Howard Hughes Corp. officials said five anchor tenants are targeted for the project, which developers hope to complete in 2000. It would be located along the western Beltway in the Summerlin area.