In 2010 I wrote about my history with Santa Monica Place and Macerich's $265 million renovation which opened an hitherto enclosed fortress mall. (See: Shulmaven: My History with Santa Monica Place ) As of 2010 Macerich had invested a total of $400 million in the asset and much more since then. A few weeks ago Macerich turned in the keys to the lender thereby walking away from a $300 million mortgage. What makes this credit event critical is that this mall was once anchored by toney Bloomingdale's, while Nordstrom still hangs on and the real estate advisory service Green Street rated the mall A+. Santa Monica Place was not in the category of the B and C malls in second tier cities that have been foreclosed upon in recent years. Indeed Santa Monica is among the priciest real estate markets in the country.
Then, why did the mall fail. Santa Monica Place could not keep pace with the mega-mall in Century City and it faced new competition form Rick Caruso's luxury development in nearby Pacific :Palisades. The mall was plagued by it congenital under-parking and the confusing nature of the city-owned parking structures. However, the most important reason for its financial demise was crime and the perception of crime in the area. All of this was dramatized during the civil disturbances associated with the murder of George Floyd in 2020 at the adjacent open air Santa Monica Promenade. To add an exclamation point to what happened at Santa Monica Place, Federal Realty, a highly regarded operator of street retail and community shopping centers exited from the Promenade by selling all of its remaining holdings for $103 million.
The lessons here are straight forward. Retail real estate requires constant investment and the surrounding environment has to welcoming and safe. Absent that, even what can be characterized as A+ can fail.
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