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Stockdale Quietly Shops Repurposing of San Diego Shopping Mall

Firm Eyes Acquisition, Office Conversion at Westfield Horton Plaza
June 29, 2018
Stockdale Capital Partners of Los Angeles has shown local business and civic leaders its plans to convert downtown San Diego’s Westfield Horton Plaza mall into an office campus.

France’s Unibail-Rodamco recently completed its $16 billion takeover of mall operator Westfield Corp., but the fate of at least one property in that deal – downtown San Diego’s once iconic but fading Westfield Horton Plaza – remains very much in flux.

Though it has not responded to requests for comment from CoStar News or other media, Los Angeles-based investment firm Stockdale Capital Partners is currently in escrow to purchase and potentially repurpose the 33-year-old mall at 324 Horton Plaza into a creative office campus.

Westfield is also not commenting, and no formal project has yet been placed before a city planning agency. But Stockdale in recent weeks has met informally with civic leaders and business advocacy groups to present preliminary draft renderings for an office park on the 10-block site in the heart of downtown.

Those who have seen renderings have told local media that the repurposing includes converting vacated retail anchor spaces into high-ceilinged offices, with other creative elements designed to attract cutting-edge technology companies and their young workers. There would also be ground-floor retail elements, along with changes aimed at opening up the property’s design, so that the campus could better interact with its downtown surroundings.

The mall, opened in 1985 by developer Ernest Hahn at a cost of $140 million and owned by Westfield since 1998, has long been known for a fortress-like layout that limits connections to adjacent businesses, parks and other civic elements.

While the 900,000-square foot property, with an eclectic mix of modern and traditional architectural styles, was considered iconic and attractive when it opened, in recent years the mall has lost several anchor tenants – most recently a Nordstrom store that closed in 2016.

Last month, current mall tenant Jimbo’s Naturally, a locally-based natural foods grocer, filed a lawsuit against mall operators in San Diego County Superior Court, alleging Westfield allowed the mall to fall into disrepair, creating an “unwelcome environment.”

Westfield has not formally responded to the suit.

About five years ago, Westfield announced plans for a significant overhaul of the downtown property. But the company ultimately decided to focus its resources on other projects in its global portfolio, including the extensive ongoing retail and apartment expansion at its popular upscale mall in San Diego’s University Town Center.

Local business advocacy groups that have been shown Stockdale’s preliminary plans for the downtown site include the San Diego Regional Economic Development Corp. and the Downtown San Diego Partnership. Those groups are generally supportive of the plans but declined to comment on specific elements to CoStar News.

In an email, Downtown San Diego Partnership President and Chief Executive Betsy Brennan said the organization has supported “thoughtful and vibrant downtown development projects” for more than 40 years, and looks forward to engaging with those who are planning the Horton Plaza campus.

Brennan said the development team that recently presented group leaders with renderings “plans to bring back this treasured property to the standing it once enjoyed by injecting energy and enthusiasm, as well as high-paying and innovative jobs, into the heart of our urban core.”

Other observers have noted that what Stockdale is likely aiming for in San Diego is similar to its successful overhaul of the failed Galleria retail mall in downtown Scottsdale, AZ. Stockdale purchased the Galleria in 2013 for $69 million, about half the cost of its original development by another group in the early 1990s.

Stockdale converted the Scottsdale mall into what is now known as Galleria Corporate Centre, bringing in high-profile technology tenants such as Yelp, Zenefits, CA Technologies and most recently, website builder Weebly.

Downtown San Diego has long sought a similar array of big-tech players that could create new jobs and other catalytic economic benefits for the region.

Real estate consultant Gary London, who has not seen Stockdale’s plans for Horton Plaza, said there’s no guarantee that the firm’s Arizona experience can be replicated locally. But its results in Scottsdale suggest it has ties to a prospective tenant base that could serve it well in downtown San Diego.

“To the extent that they can do something creative with these 10 blocks, and retain some of the existing character, that’s very much a potential attractor,” said London, senior principal of San Diego-based London Moeder Advisors.

London said downtown San Diego already has hundreds of new apartments and other elements in place or on the way, along with a large current contingent of young tech workers living downtown but commuting northward to their jobs, in places like UTC and Carmel Valley.

What’s long been missing downtown is the catalytic large tech employer that would commit to locating downtown, in the process creating an active cluster of similar firms that would follow. But the current entire inventory of downtown office space is just around 10 million square feet, most of it built more than 20 years ago.

The consultant said big tech firms are very well aware that San Diego can provide much more affordable housing to workers than is available in places like San Francisco, Silicon Valley and Seattle. However, the lack of current new office inventory, local brokers and others have said, has caused companies like Amazon to ultimately look elsewhere after checking out downtown San Diego.

London said that’s a situation that other downtown projects now underway, such as Manchester Pacific Gateway and Makers Quarter, are trying to address with new office elements, and which Stockdale’s project would also be tackling.

London said repurposing the Horton Plaza mall is preferable to plans informally proposed previously by other developers seeking to completely tear down the old mall and build new office high-rises on the site. Even if demolition of some current elements is required, a renovation and repurposing would likely take much less time to get approved and built than if a complete razing takes place first.

“If that happens, you’ll just have this big hole sitting there in the middle of downtown,” London said.

Lou Hirsh, San Diego Market Reporter  CoStar Group   
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