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The Puente Hills Comeback

The Krausz Cos. helps Puente Hills shed its checkered record for a new look and tenant mix.

In 1996, Puente Hills mall was near obsolescence. The 1.2 million sq. ft. center had lost its Broadway department store when the chain closed its doors, and many of the other tenants had left as well.

In fact, when The Krausz Cos. Inc., San Francisco, purchased the mall from Hahn Property Management in August 1996, only 49 percent of the mall remained leased. Shortly after the purchase, JCPenney vacated, leaving only two anchors: Sears and Robinsons-May.

While the center's future appeared bleak, The Krausz Cos. saw immense potential despite Puente Hills' recent poor performance. Krausz executives attributed the center's downfall to a failure to keep pace with changing demographics.

"If this site were farm land, and you announced that you were building a [Puente Hills-type] center, tenants would line up around the block," says Jay E. Krigsman, real estate director for The Krausz Cos.

Solid location, shining demographics Located in the City of Industry, about 40 miles southwest of Los Angeles, the cross shaped, four-anchor Puente Hills sits just south of the Pomona Freeway (Highway 60). The highway exits to Azusa Avenue, which feeds directly to the mall. Colima Road, another major thoroughfare, runs along the property's south border. Traffic counts taken in 1995 show that 220,000 cars per day pass the property on the freeway and that 40,000 cars per day move through the intersection of Azusa and Colima.

Within a 5-mile radius of the shopping center, the population of 356,628 is projected to grow slightly over the remainder of the decade. During the past 10 years, area population has shifted to an ethnically diverse mix of middle and upper middle class consumers, including Asians, Caucasians and Hispanics.

More than 40 percent of adults within a 1-mile radius of the center have college degrees. Thefamilies are well-off, with an average household income within 1 mile of $68,313 per year; within 5 miles, average household income stands at $64,509.

With those figures, the right center is likely to give nearby centers a run for their money. The closest, Brea Mall, about half an hour away, has a 5-mile target radius with 50,000 fewer people and about $3,000 less in average household income.

"What we saw at Puente Hills was a facility designed for a different time," Krigsman says. "It has a good location, good visibility from good roads and is surrounded by single family homes with high income. But it was designed for 2,000 sq. ft. retailers. Today, [a developer] would never build a mall like this in southern California, because there wouldn't be enough specialty retailers to fill it."

>From the ground up The last Puente Hills renovation in 1991 failed to provide the punch necessary to attract new tenants. At the same time, nearby malls moved ahead and began to attract customers from the Puente Hills marketing area. More Puente Hills tenants left, which soured the mall's reputation among potential tenants and further exacerbated the center's poor shopper traffic.

According David Pyle with The Krausz Cos., retenanting Puente Hills required a new approach. While a repositioning effort for a center with Puente Hill's demographics might normally sell itself to retailers, Krausz had a much steeper road to hoe. At one time or another, says Pyle, nearly every major retailer in the country has been in Puente Hills and left. To bring them back, Puente Hills has to prove itself capable of bringing customers back. Promising customers to retailers wouldn't work, Pyle reasoned; the people have to be there first.

In order to return Puente Hills to a traffic-heavy hub, Pyle and Krigsman developed a strategy to create a town center with many types of retail. The old Broadway location would anchor a new entertainment retail wing, while the old JCPenney wing would host big-box, power center retailers and offer exterior and mall entrances.

If the entertainment and power-center elements of the strategy succeeded, they hypothesized, then the Sears and Robinsons-May wings might attract and hold a group of conventional, 2,000 sq. ft. tenants.

Timing the strategic execution Timing was an important part of the strategy. By building and leasing the entertainment wing first, Pyle and Krigsman hoped to bring people back to the mall, creating a base for future leasing. The first move was to demolish the old Broadway store and rebuild an 85,000 sq. ft., 20-plex theater. Pyle decided to tear the wing down to its foundation and build a new structure, as a way of signaling to the community that something different and exciting was happening at Puente Hills.

The AMC Theaters opened in April 1997 and immediately drew large crowds. "Our goal was to attract 20,000 people per week to the theaters," Pyle says. "Since opening, we've had 30,000 to 50,000 people per week. According to AMC, this theater ranks in the top 2 percent of all theaters in the country."

To design the renovations, Pyle hired Stoutenborough Inc., a Newport Beach, Calif.-based retail and entertainment complex design specialist. The design firm was first given the task of designing Puente Hill's theater with no exterior entrances. To access the theater, patrons would have to go through the mall's common entrance.

For the theater make-up, Stoutenborough developed a split-face, concrete block and steel design, reflecting a contemporary Art Deco style. Without an exterior entrance, Stoutenborough searched for a concept that would add interest to the view of the mall from the freeway.

"We built a wave wall facing the freeway, and we lighted the exterior of the building from the ground up," says J. Todd Stoutenborough, company president. "At night, a lot of light bounces off the structure. When we first turned on the lights, traffic on the freeway slowed to a crawl. It was quite a surprising sight."

Awash in rainbow colors The colorful sight inside Puente Hills' has surprised shoppers as well. In collaboration with Peter Erskine, a Venice, Calif.-based solar spectrum artist, Stoutenborough designed a permanent, interactive solar spectrum lighting exhibit to engage shoppers while passing through the center's common area.

To accomplish this goal, Stoutenborough placed two escalators inside a large floor opening and cut a tiny hole in the roof. Erskine designed a motorized heliostat or sun-stop mirror that sits in the hole and follows the position of the sun throughout the day. The mechanism reflects the light through the hole onto a series of mirrors, which redirect the sunlight toward three prisms, located on the escalators and the ceiling.

The prisms bathe the escalators, the floor and the ceiling in the colors of the rainbow throughout the day. The display mystifies shoppers, especially children, who frequently dance through the lights of the solar spectrum. Which is what gave Erskine the idea for the name of his creation: "Sundance."

Gallegos Lighting, a theatrical lighting designer based in Burbank, Calif., created a light show to continue the feel of "Sundance" on cloudy days and at night. At $250,000, the spectacular light show costs a fraction of what conventional skylights would have cost.

In mid-November, the renovation's second phase was completed with the unveiling of a new center court. Stoutenborough replaced an existing carousel with the sights and sounds of a river that flows around the center court and empties into a lake. The mall's new waterways are stocked with fish, and the surrounding common area features a landscaped "coffee garden" with seating for shoppers.

Results: retailers return to Puente Hills The theater and center court have ignited Krausz's leasing strategy. Last Nov. 14, an 11,000 sq. ft. Slam Site opened next to AMC -- an attraction that offers a variety of virtual reality and interactive games. In the same month, the mall signed a 21,000 sq. ft. lease with Sportstown USA, which brings organized, competitive arena hockey and soccer to the center. A 250-seat, seven-unit food court also is slated to open in the entertainment wing early this year.

In the old JCPenney location -- now taking shape as the new power center wing -- Burlington Coat Factory has signed on and will open this spring or summer. Spectrum Club, a high-end health club has signed a letter of intent for 50,000 sq. ft. Negotiations are proceeding with Border's Books & Music, as well as with two other power center retailers.

Todai Restaurant Hollytron, an Asian-owned home electronics retailer, has taken 24,000 sq. ft. next to Sears. The power-center style store is a little out of place on the conventional mall side of the center; still, Hollytron's business has boomed during its first six months.

The renovated mall design offers five restaurant pads with outside patios located all around the site. Todai Restaurant, a Japanese buffet, is building an outdoor patio, while Outback Steakhouse has taken another site and plans to open in the first quarter of this year.

Building to critical mass The $35 million renovation has finally produced the critical mass necessary to bring back conventional retailers. "The Gap is in front of their real estate committee right now discussing a 5,500 sq. ft. Gap & Gap Kids combination store," Krigsman says. "Old Navy Clothing Co. has visited and also is considering Puente Hills."

As Krigsman continues to push, he senses that Puente Hills has reinvigorated its viability for retailers in search of customers. In talks with retailers, he no longer has to make excuses for a 40 percent occupancy rate. Instead, he is telling prospects that his plan is to reach an occupancy rate in the 90s by the end of the year.

Michael Fickes is a Baltimore-based freelance writer.

* YES VACANCY: At its lowest point in 1996, Puente Hills' occupancy stood at 49 percent.

* FORTIFIED SURROUNDINGS: Within a 5-mile radius, the population of 356,628 has an average household income of $64,509.

* MOVIE MADNESS: Puente Hills' AMC 20 Theatres welcomed 29,558 patrons in April 1997, its first month of operation.* THAT'S ENTERTAINMENT RETAIL: Of the center's 1.2 million sq. ft., 15 percent has been earmarked for entertainment-related tenants.

* FULL CIRCLE: By the end of this year, Puente Hills is expected to be 90 percent leased, and is currently in negotiations with retailers including TGI Friday's, Sports Authority, Borders Books & Music, The Gap, Just For Feet, Linens 'N Things, T.J. Maxx, and California Pizza Kitchen.

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