Crown Realty &has established a track record of tackling complex projects. The privately held firm based in Irvine, Calif., is on the verge of its biggest challenge yet with the $111 million purchase of Media City Center in Burbank, Calif.
The 1.2 million sq. ft. retail center is ideally suited to Crown's strategy of creating value by redeveloping or repositioning under-performing properties. The 10-year-old retail center has a vacancy rate of 17% — significantly higher than the 3.4% average vacancy rate in the Glendale/Burbank retail market, according to Encino, Calif.-based Marcus & Millichap.
Crown plans to overhaul the center at a cost between $30 million and $35 million after finalizing the purchase from San Diego-based Pan Pacific Retail Properties Inc. in mid-March. The company plans to improve the center's visibility from the street and overall appeal of the shopping center, as well as add new restaurants and big-box retailers to the under-utilized ground floor. “Our intention is to reposition the mall and really make it a centerpiece of retail for the whole area,” says Jaime Sohacheski, chairman of Crown.
The retail center needs a firm like Crown to take it to the next level, according to Christopher Maling, senior director of Marcus & Millichap's national retail group in Los Angeles. “Crown is a player in the industry that has a very good comfort level with the southernmarketplace,” Maling explains. “They have done other retail development in Burbank, so they know the market.”
Media City will be the “crown jewel” of Crown's portfolio due to its sheer size and great location, Sohacheski notes. The diverse retail complex includes a 799,636 sq. ft. three-level enclosed shopping mall and 442,731 sq. ft. of freestanding retail space. Macy's, Sears, Mervyn's and AMC Theatres anchor the mall portion, while freestanding stores include the likes of Barnes & Noble, Circuit City, California Pizza Kitchen and Virgin Megastore.
“Media City is a good value compared to what other malls have sold for recently,” says Maling. The Glendale Galleria, a regional mall in neighboring Glendale, Calif., sold at the end of 2002 for $415 million or $296 per sq. ft. That sale makes Media City look like a bargain with its price of $111 million, or $92.50 per sq. ft.
Crown Development was formed in 1978, when Sohacheski began purchasing and converting abandoned buildings in the downtown area of Los Angeles. In 1994, Sohacheski partnered with fellow developer Robert Flaxman to expand the firm as Crown Realty & Development.
The Media City bid is evidence that Crown is serious about beefing up its presence in southern California. With the Media City buy, Crown will increase its portfolio by nearly one-third to more than 3 million sq. ft. of retail and office properties in Burbank, West Los Angeles and Orange County. The total portfolio is valued at $380 million, and the firm plans to complete an additional $120 million in new acquisitions by year-end.
When the sale of Media City closes, Crown will own more than 1.75 million sq. ft. in downtown Burbank. Crown also controls the largest available chunk of developable land downtown, adjacent to its Gateway Burbank property. The company plans to break ground later this year on a 23-acre mixed-use project that will feature office space, a community center and a city park.
It's clear why Crown focuses on Burbank: Demographics in the Glendale/Burbank market are attractive with a median household income of $62,554 and a population of 375,427 growing at 2.3% per year.