By  on July 6, 2010

SANTA MONICA, Calif. — Santa Monica Place will begin a second life next month as a sleek open-air shopping center by the sea with a heavy dose of luxury in an effort to lure back customers it lost to higher-powered competitors.

Owner Macerich Co. has invested $265 million in a more than two-year overhaul that took off the roof of the center, which was designed by famed architect Frank Gehry with Gruen Associates and opened in 1980. Although the recession has hit hard in California, the company’s goal is to lift sales per square foot from the $300 range, when Santa Monica Place closed in March 2008, to $1,000 or more.

Macerich has signed 70 tenants representing luxury, dining, sportswear, shoes, men’s, department stores, accessories, contemporary and trendy fashions. Retailers include Bloomingdale’s, Nordstrom, Louis Vuitton, Tiffany & Co., Nike, Hugo Boss, Kitson, BCBG, Tory Burch, True Religion, Hot Topic, Kenneth Cole, Juicy Couture, Barneys Co-op, Burberry, Coach, Seven For All Mankind, AllSaints Spitalfields, Michael Kors and Joe’s Jeans.

“The higher-end customer [in Santa Monica] was crying out for luxury,” said Randy Brant, Macerich executive vice president, real estate.

He pointed to the neighboring Third Street Promenade’s $800-plus sales per square foot as evidence of the area’s appeal to shoppers, adding that well-heeled Santa Monica residents have been spending for their luxury at South Coast Plaza in Costa Mesa, Calif., or in Beverly Hills.

“It seems like people on Third Street Promenade are following trends, as opposed to creating them, and I think they have retailers that create trends,” Fraser Ross, the owner of Kitson boutiques, said of Santa Monica Place, which will have a two-level, 7,500-square-foot Kitson store. “People, when they want to go for an outing, they will want to go to the shopping center and spend a whole day in Santa Monica for the beach.”

Brant outlined four kinds of customers being targeted by Santa Monica Place, which is to open Aug. 6: shoppers from in and around Santa Monica, Southern Californians on day trips, tourists and office workers. “Within the half-mile, we have as many daytime office people as Century City and, if you go a mile or so, it gets much better,” he said. “In Santa Monica, there are major entertainment and high-tech companies [such as MTV and Yahoo] that literally have thousands of people.”

Like many things in Southern California, Brant spoke about consumer acceptance of Santa Monica Place in the context of traffic. He suggested people who live and work west of the 405 Freeway would gladly not cross that Los Angeles boundary that divides Santa Monica from Beverly Hills, downtown and other neighborhoods on the city’s east side if they don’t have to for desired shopping options. “Most people don’t realize, unless you live here, that there is a distinct difference in the people, the psychographics west of the 405 versus east of the 405,” he said.

Despite the convenience and glittering new stores, questions about Santa Monica Place persist. Parking is an issue. About 2,000 spaces are dedicated to the shopping center, but whether that is sufficient and can counteract congestion in the area is unknown. And though Santa Monica residents have annual median household incomes of more than $100,000, their interest in shelling out at a big new retail project has yet to be tested.

Without question, Santa Monica Place needed an upgrade. In 2004, Macerich devised a plan to demolish the mall in favor of a mix of high-rise condominiums, shops and offices. That blueprint was sidelined after residents of Santa Monica, who are vocal about land use and parking issues, raised concerns about traffic and building height.

Macerich then came up with a downsized proposal for a 550,000-square-foot, three-level, open-air shopping center with ocean vistas. At the core is a 17,000-square-foot plaza where community events can be held. Elliptical shapes and glass are prominent elements of the design. The city approved the plan in 2007, but the relaunch of Santa Monica Place was anything but smooth. Macerich delayed the original 2009 opening to coordinate with the new Bloomingdale’s and Nordstrom stores.

“There’s a lot of focus for the retailers on these stores because of what we are building and the strength of the demographics,” said Douglas Roscoe, senior manager, property management at Macerich.

The Rouse Co., which merged with General Growth Properties Inc. in 2004, built Santa Monica Place with the Hahn Co., a shopping center developer and minority owner.

Macerich bought Santa Monica Place from Rouse in 1999 for about $130 million. By that time, Third Street Promenade, which was refurbished in 1989, had eroded the mall’s customer base and, in 2002, The Grove, built by Caruso Affiliated, introduced the lifestyle concept to Angelenos, who quickly became enamored of shopping outside.

Now even Rick Caruso, president and chief executive officer of Caruso Affiliated, thinks Macerich could have a winner in Santa Monica Place. “I wish it was my project,” he said. “I think Macerich is doing a really good job.”

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