Mexico’s Grupo Cinepolis is rushing to upgrade Panama’s upmarket Soho City Center with a new restaurant and entertainment wing to transform the shopping experience at the loss-making site.
Citelis, the development arm of the Mexican cinema operator, will invest nearly $70 million by 2022 to overhaul the mixed retail, office and residential complex located on Calle 50 in the heart of Panama City’s financial district, said chief executive officer Eduardo Ramirez. When completed, the project aims to transform the facility, boosting the developer’s revenues to roughly $40 million from $10 million currently and allowing it to hit break even, he added.
“Right now we have 50,000 square meters [538,000 square feet] of gross leasable space in 90 percent retail and 10 percent restaurants,” Ramirez told WWD, adding that when the project is finished in about two years, the setup will be 60 percent retail and 40 percent food and entertainment.
“Malls have to generate exciting experiences and that doesn’t come from just stores anymore,” Ramirez mused. “Soho City Center will have 100,000 offices and we will need to entertain workers and apartment owners. That is why we are going to have many more restaurants, bars, concert halls and a stronger movie and kids’ entertainment offer.”
Morelia, Mexico-based Citelis bought Soho from Panama’s embattled Grupo Wisa for $360 million in 2017, beating offers from suitors including Miami’s Bal Harbour Shops. The purchase came at a big discount following the U.S. Treasury’s Office of Foreign Assets Control (OFAC)’s money-laundering probe against Wisa owner and president Abdul Waked.
As news of the scandal hit Panama, the mall began to empty as many luxury houses were unable to accept major credit cards or import merchandise from the U.S. Ramirez, part of the billionaire family controlling Cinepolis, claimed the situation has stabilized, with sales growing as much as 16 percent in the past 12 months and set to increase sharply after it completes its overhaul.
As part of that process, the company will invest $15 million to $18 million to build the new gastronomy wing, enlarge parking space and make building improvements. That sum will come on top of the $45 million to $50 million already spent on upgrades since the acquisition, according to Ramirez. Simultaneously, Citelis will finish erecting the complex’s office and residential North Tower, which was incomplete when OFAC launched the investigation that also threw Waked’s other businesses, notably regional perfumery chain La Riviera, into bankruptcy.
Citelis will also earmark $15 million to cap the 32-story tower with a 120-room hotel and upgrade its facade, Ramirez said.
All together, the moves will streamline the look and feel of the three-part complex. It is also expected to boost daily traffic to roughly 6,000 to 7,000 people, up from 800 currently, giving Soho City Center rival Multiplaza a run for its money, Ramirez said.
He declined to reveal future tenants but said Panamanian, Mexican and Colombian gourmet dining and lounge chains such as Andrés Carnes de Res and Cantina 20 will likely join its new “Soho Market” and “Pasaje Latino” gourmet food courts which he claimed are higher end than Multiplaza’s.
“The emphasis will be on gourmet dining with architecture and design,” Ramirez explained. “We don’t want people to feel like they are in a cold food court with plastic tables.”
Sephora, MAC Cosmetics, Lacoste and Hugo Boss are some of the brands set to join the revamped space. They will join Louis Vuitton, Chanel, Fendi, Salvatore Ferragamo, Coach, Tommy Hilfiger and Ralph Lauren, among others.
Roughly 70 percent of the mall’s merchants left in the wake of OFAC’s investigation, said Ramirez, though many have since returned and 80 percent of them have seen sales increase in the past year.
Following the arrival of new reformist President Laurentino Cortizo, Central America’s top economy is set to grow up to 5 percent this year, significantly more than the 3.7 percent chalked up in 2018 which followed years of similarly sluggish expansion.
“We are conscious that Panama has contracted but even though Soho had a stress moment, sales are increasing,” Ramirez said. “And this is not Soho-specific. We see the new government as more proactive and people more motivated and energized. In the next few years, there will be more money in the streets and more infrastructure investment.”
That should also help boost Citelis, whose 14-strong Mexican mall portfolio has 500,000 square meters of gross leasable area. The company’s star shopping center, Sfera City in Monterrey, has a 16 percent internal rate of return (IRR) compared to much lower rates at Soho, which Citelis wants to elevate to 14 percent.
Citelis currently charges $1.50 to $2.50 maintenance quotas and 4 to 5 percent of retail sales, including on biggest tenants LVMH Moët Hennessy Louis Vuitton and Chanel, with annual turnover of $10 million and $8 million, respectively. It charges restaurants 7 to 9 percent of sales and movie theaters 11 to 14 percent.
When Soho Mall is fully revamped, Citelis should be able to charge $2.50 to all tenants, not just $1.50 to some, as it has been forced to discount rents to compensate for the site’s difficulties, according to Ramirez.
He is confident the family’s Panama gamble will pay off.
“We saw an asset that could generate great value over time and in a very good location,” Ramirez said, adding that the opportunistic acquisition came at a 30-to-35 percent distressed discount. “It’s a good project in line with mixed-used trends and high-design focus and we knew the business could be successful and profitable.”