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Among regional mall owners, you hear a lot of talk about converting vacant boxes into new uses - and you see a variety of proposed uses. From medical office complexes to large-scale entertainment venues, anchor spaces are being reinvented at regional centers. Las Vegas-based Moonbeam Capital Investments is going a step further by striving to create a mixed-use hybrid office park and retail center at West Oaks Mall, located in the Orlando suburb of Ocoee, Florida.

Moonbeam is known for purchasing distressed commercial real estate assets and converting them into mixed use properties. Its affiliate purchased West Oaks Mall in November 2012 for nearly $16 million, in a short sale arranged by rhe lender to the former owner, GGP. The center was distressed but had a few strong performing ten-ants, such as AMC Theatres.

Moonbeam relished the challenge of converting West Oaks Mall into a viable commercial center. Due to the Mall's location in the populous Orlando suburbs - with 232,000 people living within a five-mile radius - Moonbeam searched for an office tenant for the vacant Sears anchor. lr had strong cooperation from the City of Ocoee, which wanted to help revi-talize the center and increase the area's employment base. "We were able to work closely with the City of Ocoee to get permits and incentives to complete a project that could revamp West Oaks Mall and create jobs for the surrounding com-munity," says Shawl Pryor, chief oper-ating officer of Moonbeam's affiliate, Moonbeam Leasing & Management. The company struck gold when a division of Xerox -now called Conduit -agreed to lease the first floor of the Sears space and convert it to a customer service center for Florida's Sw1Pass toll system, bringing more than 500 jobs to the area. It was the start of a transformation at West Oaks Mall that would rake a few years to complete, says Steven Maksin, Moonbeam's chief executive officer.

Following that early success, Moonbeam leased 220,000 square feet in a former Belk's department store box to Bed Bath & Beyond for use as offices for its national back-end customer support function. The facility opened this year, employing over 300 people.

Moonbeam also turned a property tax issue with Orange County into a leasing opportunity. After several anchor tenants departed, decreasing the center's income, Moonbeam challenged IRS property tax valuation as too high. When the tax assessor personnel came to analyze the mall, it noticed the new office tenants and realized that the county could benefit by opening an office and service center there.

Today, West Oaks Mall is home to the 40,000-square-foot office for the Orange County Tax Collector. The office includes the county's motor vehicle office service center, which brings in residents on a daily basis. To dare, West Oaks has created almost 2,000 jobs for the City of Ocoee within a three-year period.

"When we proposed several years ago to bring in non-traditional tenants, the initial reaction from our traditional mall tenants was mixed," says Maksin. "Now, however, many of them understand that the mall cannot sustain itself with retail only. Having additional foot traffic with these creative office spaces and service centers has demonstrated that mixed-use works."

Pryor adds, "When we began bring-ing in non-traditional tenants, a lot of our retail tenants began to experience an increase in traffic and sales from convenience shoppers employed by the non-traditional tenants. They've also seen an increase in online orders with in-store pick-up from those same employees."

Pryor estimates that between the mall's office workers and the county residents who must visit the tax and motor vehicle service center, the mall's non-traditional tenants have increased foot traffic at the center by more than 1,000 people per day.

In 2018, Moonbeam renewed AMC Theatres' lease for 15 years, which enabled AMC to renovate its theater and expand it to a state-of-the-art facility. The expansion has also increased foot traffic at the center, as well as demand for full-service restaurants.

All of the increased foot traffic has created an unexpected challenge for the mall's food tenants, who struggle to accommodate the daily lunchtime rush. As a result, Moonbeam is seeking a number of fast casual and quick service food concepts to expand the center's food court and restaurant offerings and meet the increased demand.

While West Oaks still has some con-tinuing work to do on leasing - Pryor says the center is in the first phase of its three-phase redevelopment plan - it has made plenty of progress. Consumers and prospective tenants are taking notice.

"West Oaks Mall is a great example of an adaptive reuse project that is in mid-stream," says Pryor. "It is moving at an aggressive pace." Mall sites like West Oaks offer employers -especially those with call centers - many benefits, says Maksin. First, there is no vertical construction required; all workers can usually be located on a single level, in 10,000 square feet of a former anchor box.

Second, employers can increase the density of employees per 1,000 square feet of office space because of the even layouts of former anchor boxes. Third, parking is plentiful and free. Fourth, the mall is easy for employees to access from the area's main thoroughfares and by public transportation. Fifth, utility infrastructure - including underground power lines and internet cables providing the fastest speeds - is already present thanks to previous retail tenants. Sixth, the retail portion of the mall is easily accessible to employees.

"The benefits of second-generation mall space become readily apparent to companies seeking large office space for service centers and call centers when compared to traditional office space," says Maksin.

Moonbeam is a private equity fund whose affiliates specialize in acquiring, managing, leasing, operating and repurposing distressed commercial real estate assets. They own more than 50 properties in 16 states, including 10 million square feet of retail space. Moonbeam's strength is in revitalizing non-performing commercial real estate assets, says Maksin. Other Moonbeam properties have used the example of West Oaks to secure non-traditional tenants and in so doing, have bolstered the sales of existing tenants. At Renaissance Office Park in Las Vegas, Nevada, Moonbeam leased space to the Nevada State Police for use as a training academy.

At Columbia Place Mall in Columbia, South Carolina, Moonbeam persuaded the Richland County government to relocate many key service offices to former anchor spaces. Moonbeam has pending deals to bring a national medical tenant to several of its centers and has brought in entertainment uses, sports concepts, logistics users, healthcare tenants and box office movie productions/TV series.

One of Moonbeam's early successes was Burlington Center Mall in Southern New Jersey. Moonbeam's affiliate acquired the property in 2012 with the hope of redeveloping it into a revitalized retail destination. Moonbeam quickly realized that the area needed more office space, not more retail space. "More retail was just not economically viable for the area," says Maksin. "Instead, we proposed a mixed-use development with housing, creative office space, and a warehous-ing facility." Moonbeam's plan was so attractive that a buyer appeared and purchased the center for $22 million. Moonbeam is now working with the new owner to redevelop the center for mixed-use.

That experience led Moonbeam ro step back and take a broader look at its portfolio, says Pryor, and consider broader possibilities for redevelopment and repurposing by also utilizing the land surrounding a center. With more than 50 properties, Moonbeam's affiliates own a lot of land adjacent to their respective properties. 

"We are leveraging some of our acreage through our relationships with industrial and logistics providers and exploring non-traditional retail projects whereby we create jobs, our own traffic and change neighborhoods" says Pryor. "We want to take the existing retail space and combine it with new uses that helps support that retail." Moonbeam also applies its expertise to other commercial real estate sectors, including multifamily residential in Cleveland, Ohio, and hotel in Farmington Hills, Michigan. Moreover, one of its affiliates recently acquired a marina in Brooklyn, New York that it is leveraging is strong relationship in retail to bring in restaurants and retail into the redevelopment.

 

Shearin, R. (2019, August). Traffic Drivers. Shopping Center Business August 2019. Retrieved August 13, 2019, from https://editions.mydigitalpublication.com/publication/?i=608028&p=&pn=#{"issue_id":608028,"page":0}