FEATURE ARTICLE, MAY 2008

A STEADFAST REVIVAL
Steadfast Commercial Properties has found success transforming older regional malls into viable retail centers.
Randall Shearin

Newport Beach, California-based Steadfast Commercial Properties has quickly made a name for itself in the industry by buying malls in smaller West Coast markets. The centers are in established older trade areas. They need some attention, and Steadfast knows just how to give it to them. The company formulates a plan for every center it purchases before finally acquiring it. Doing so has allowed it to build a portfolio of centers with a reputation for turning neighborhoods around.

Steadfast transformed Everett Mall in Everett, Washington, after purchasing the center 3 years ago.

Western Real Estate Business recently spoke to Jim Yoder, senior vice president of Steadfast Commercial Properties.

Steadfast has been most active in the Pacific Northwest, a region that the company sees as a viable opportunity for the acquisition of new properties and the rejuvenation of older, enclosed centers. Steadfast has two properties in Greater Seattle/Tacoma: Everett Mall and The Commons at Federal Way. Everett Mall underwent a major transformation after Steadfast purchased the center 3 years ago. The company rejuvenated the entire enclosed mall complex with a new look and new tenants including Old Navy, Borders Books & Music, Regal Cinemas and Steve & Barry’s. The company also added a 100,000-square-foot power center component to the center with Best Buy, Bed Bath & Beyond and PetSmart, among others. Sales have risen nearly $100 per square foot at the Everett Mall since Steadfast acquired it.

South of Seattle, the company also purchased The Commons at Federal Way in 2003. Formerly known as SeaTac Mall, the center was in a great location, but needed serious updating when Steadfast purchased it. Steadfast landed new anchor deals with Cinemark and Target, and a new center was born. The company has added a number of new tenants, including Borders Books & Music, Applebee’s, McGrath’s Fish House and Panera Bread. Sales jumped $25 per square foot during the first year following the renovation, and have continued to rise since.

The Commons at Federal Way in Federal Way, Washington, is another older center that Steadfast purchased and remade into a thriving center.

Now, Steadfast has acquired another center it has high hopes for. In the Sacramento suburb of Citrus Heights, California, the company has acquired Sunrise Mall. Originally built in 1971, the center had been owned by multiple parties in recent years. Steadfast was able to negotiate a deal to acquire the land and the leasehold for the property. Acquiring the land allows Steadfast the opportunity to do a lot of redevelopment on the property. Steadfast acquired the property through an $84 million, fixed-rate loan originated by Capmark Finance, funded through AXA Equitable.

“We are very excited about the opportunity to renovate the center inside and out,” says Yoder. “Citrus Heights is a great community. We believe that Sacramento is a great market.”

The 1.2 million-square-foot center has four successful anchor tenants in two Macy’s stores, a JC Penney and Sears. The center is 95 percent occupied, with inline shop sales at $360 per square foot currently. With the plans that Steadfast has for the center, it hopes to move the property closer to $450 per square foot within the next 36 months. The center went through a $10 million interior remodel in 1999, and in 2006, the previous owners redeveloped the food court and added a new entrance to the center.

Steadfast owns and operates Yuba Sutter Mall in Yuba City, California.

“Overall, the center is in really good condition,” says Yoder. “There has just never been any major repositioning of the center in 37 years.”

Steadfast is looking at repositioning the center in two phases. The first phase will take the mall’s merchandising to the next level. Steadfast plans to broaden the center’s apparel offerings, and offerings to shoppers in their teens and 20s. Women’s ready-to-wear, children’s and family apparel are also categories that will be improved with new tenants. One goal that Steadfast hopes to accomplish with this is to improve the cross-shopping of the department store shopper with the mall shopper.  Also targeted are five to seven restaurants.

“We want to bring some of the more notable, national retailers into the mall to join those that are already there and really enhance the overall merchandising,” says Yoder. “We have millions of dollars set aside just to make that happen.”

Steadfast has big plans for its recently acquired Sunrise Mall in Citrus Heights, California.

The second phase of the renovation will entail redeveloping several outparcel buildings at the center. Steadfast plans to group some of the outparcels and create a separate, smaller center, similar to what it did at Everett Mall. Also planned is a major theater offering, which will add another anchor to the center. With the restaurant additions, this will create a major entertainment component to Sunrise Mall.

“By adding the entertainment, we’re hoping to stop leakage to other centers,” says Yoder. “Sunrise Mall hasn’t offered the things that keep people at the center for longer periods. Adding more offerings to the mall hopefully translates to more frequent shopping trips for our customers and longer trips. Those entertainment and restaurant components, plus more specialty retail and more and better merchandising, are going to dramatically shift the consumer shopping patterns and meet our customers’ needs more effectively.”

The demographics of the area, while mature, are also very stable. The primary and secondary trade areas have over 600,000 people living in about 228,000 households. The center generates about $200 million per year, and Steadfast hopes to increase that number over time. Even with the slowdown in more growing areas of Sacramento, Steadfast is seeing improvement in its trade area because it is so established within the market.

Inside Steadfast’s latest acquisition, Sunrise Mall in the Sacramento suburb of Citrus Heights, California. Steadfast will reposition the mall, which was built in 1971.

“Our real benefit is that Sunrise Mall is located in an infill, existing market,” says Yoder. “It’s in a stable, strong suburb of Sacramento. We want to position the center in the top two or three centers in the region where a retailer wants to be for coverage of the market.”

Steadfast is working on entitlements for the property during 2008. It is creating four different scenarios, based on the permissions it will receive from the department stores and the city. The company is looking to begin construction in early 2009.

“We look forward to a substantial redevelopment that will add a whole new dimension to Sunrise Mall,” says Yoder.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.