GLENDALE, Calif. — General Growth Properties, the second-biggest U.S. mall operator, is in a political and legal battle in this Los Angeles suburb to stop the construction of a proposed $300 million open-air lifestyle center mixing retail, residential and entertainment, which is scheduled to be built next to the company’s Glendale Galleria by fall 2006.
The fight, which might be decided in a Sept. 14 voter referendum on zoning changes unanimously approved in April by the city council, pits a traditional mall owner against Rick Caruso, a former president of the Los Angeles Police Commission who is a leading developer of smaller shopping centers that aren’t anchored by department stores and that often include sidewalks, parking at the curb and restaurants along with specialty chain stores.
General Growth, which is based in Chicago and operates 177 enclosed malls — second in the U.S. to the Simon Property Group — says it doesn’t fear competition from The Americana at Brand project planned by Caruso, but objects to a design that isn’t compatible with the 30-year-old Glendale Galleria because of the closing of Harvard Street leading to the mall.
The mall-development company, which bought the 1.5 million-square-foot Glendale Galleria for $415 million in November 2002, has collected 14,000 signatures on petitions to force the referendum.
Superior Court Judge Laura Matz here is set to rule today on the acceptability of language in sample ballots that Caruso is challenging.
In addition, Caruso filed a lawsuit against General Growth in February, alleging pressure to get Galleria tenants to remain in the mall. General Growth denies the charge.
The conflict is occurring as traditional U.S. mall construction has slowed because of saturation, the difficulty of securing large parcels of land suitable for construction and increased competition.
Fifty-nine lifestyle centers are planned or are under construction in the U.S., representing 30 million square feet of space — 24 of them will bow in 2004, 22 in 2005 and 13 in 2006, according to RREEF Funds/DB Real Estate. Only four regional malls are scheduled to open this year, and seven each in 2005 and 2006. Mall developers at this spring’s annual International Council of Shopping Centers convention said lifestyle centers would not supplant the mall, but would have an impact, particularly on weaker malls located near them.
“My view is [General Growth] is intimidated and threatened by lifestyle malls that are becoming the rage in the United States,” said Dave Weaver, a member of the Glendale City Council, noting that people in this city of about 218,000 have shown support for the project. “Traditionally, they’ve only handled inside malls. They’re spending millions of dollars to try to stop this.”
The city of Glendale projected that it would get about $3.9 million in sales tax and incremental property taxes from Caruso’s project. The land is now occupied by a few buildings and a parking lot.
General Growth has estimated that the Galleria might lose as much as $4 million annually because of restricted access and tenants jumping ship if The Americana at Brand is built. Caruso said he is negotiating deals with Club Monaco, Sigrid Olsen, Cole Haan and Urban Outfitters, and the center also is in talks with BCBG Max Azria, J. Crew, Eileen Fisher and Kenneth Cole.
Still, the Galleria is among the top malls in Southern California, notching $550 a square foot in annual sales. Most regional malls pull in about $242 a square foot, according to the ICSC. The Galleria casts a wide net to 25 million visitors a year who come from the San Fernando Valley, north of Los Angeles, to Pasadena to the east.
Caruso, who developed the Grove, a 575,000-square-foot shopping center near the historic Farmers Market in West Hollywood, is building $1 billion worth of projects in the state. He wants The Americana at Brand — which would be built on about 15 acres and would open onto Brand Boulevard — to feature classic elements of a lifestyle center, including 475,000 square feet of retail space, a two-acre park and 238 apartments and 100 condominiums. He said he has made a deal with Turner Classic Movies to show classic films on a large outdoor screen in the park.
“If you can get people to be on your property for no other reason than to gather and meet friends and enjoy the day, then you give them a sense of ownership and then that’s where they go back and shop, go back and dine and go back and be entertained,” said Caruso, adding that the project could surpass The Grove’s sales figures of almost $760 a square foot.
Arthur Sohikian, a spokesman for General Growth, said the company was aware of Caruso’s project before it acquired the Galleria but wasn’t concerned until recent design features emerged, including street closures and an “unfriendliness of design” toward the Galleria and other businesses on Brand Boulevard.
“It’s not about competition, it’s about compatibility,” Sohikian said. “It’s clear by the numbers that the Galleria remains a major force in Southern California. To suggest that the Galleria is against competition is absurd. By closing down streets and putting up walls, you’re making a project focus inward rather than outward toward its neighbors and existing businesses.”
The Galleria will soon release plans for a revamp that would expand the mall to street level and add some restaurants to the mix, he said.