Hunton Retail Law Resource

The Westside Pavilion—the 755,000 square foot, 1970s fortress-style mall located in West Los Angeles—has been put up for sale by its owner, Santa Monica-based REIT Macerich Co. Tom O’Hern, Macerich’s CFO, predicted that the property would likely sell within a year. And although the Westside Pavilion is facing many of the same systemic pressures that other malls are facing nationwide, those are not the only reasons the mall is up for sale.

It is no secret that the rise of online retail shopping has been pressuring brick-and-mortar retail, and the Westside Pavilion is no exception. However, the mall is also under pressure from other more localized irritants: it is sandwiched between two competitors—the Third Street Promenade in Santa Monica and Westfield Century City. To make matters worse, Westfield Century City just completed a two-year, $1 billion renovation. Macy’s recently announced that it would be leaving the Westside Pavilion next year. This follows the loss of Nordstrom, the mall’s other anchor tenant. Both Macy’s and Nordstrom will maintain stores at Westfield Century City. Macerich had recently considered removing certain exterior walls from the mall to further open it to pedestrian foot traffic at street level, but these plans appear to have been abandoned.

However, there is a silver lining for Macerich: unlike many other malls with rising vacancy rates, the Westside Pavilion is located in a desirable area near a new light rail station, so a purchase by a developer for redevelopment into a new project seems likely. According to O'Hern, “[S]omebody will have an idea to do either a mixed-use or totally nonretail use there that will likely be…the best use for a great piece of real estate and that will result in us getting value from it that we otherwise couldn’t get in holding it as a retail facility.” Put more simply by a senior REIT analyst and managing director at SunTrust Robinson Humphrey, “This is a unique situation for a unique asset.”

Unfortunately, not all malls are so fortunate. For those located in less desirable areas and not ripe for redevelopment into now-ubiquitous mixed use projects, more creative solutions will be needed.