Roughly seven years ago, Unibail-Rodamco-Westfield unveiled plans to undertake a major renovation of one of its crown jewels, the Westfield Garden State Plaza mall in New Jersey. But the global retail landlord only just broke ground on the project in Paramus.
That's because a lot happened after URW announced in May 2019 that it was going to transform 2.1 million-square-foot Garden State Plaza into a mixed-used property that included housing. In 2020, the pandemic struck, closing down stores and hammering the retail industry.
In the aftermath, in 2022 Paris-based URW announced it planned to sell its U.S. properties, and it offloaded many of its poorly performing domestic properties, paring down its portfolio.
But by 2023, URW had committed to holding onto its U.S. malls and undertook pricey revamps on properties in California. It then turned East, starting redevelopments of two malls in the suburbs of Chicago and Washington, D.C. Now, it's finally kicking off construction of the first phase of Garden State Plaza's reimagining, with hundreds of apartments planned, a price tag of several hundred million dollars and a 2 ½ year timeframe.
Dominic Lowe, chief operating officer of URW U.S., flew in from Los Angeles to the Garden State for the Wednesday groundbreaking ceremony.
"This is evidence of our strategy, which is investing in our flagship retail environments, bringing along new aligned partners who can help us accelerate and transform our shopping centers into sort of more townscapes, more town centers," Lowe told CoStar News at the event.
Mall landlords, the most notable and biggest example being Simon Property Group, are bringing new uses to their properties across the country to diversify and densify them. That includes adding housing, hotels, office space, entertainment and healthcare providers.
One of the redevelopment models, which Lowe referenced and URW is following in Paramus, is to add green space and create a kind of downtown area. In sprawling Paramus and many other suburbs, there are no traditional central business districts.
The 13-acre first phase of Garden State Plaza's remake will include luxury apartments, a 1-acre town square park and roughly 50,000 square feet of street-level retail space for shops and restaurants, creating an outdoor district.
The initial work is mainly ground and site preparation followed by construction of Modera at Garden State Plaza, two mixed-use, five-story midrise buildings with 575 total residential units. The site is now a surface parking lot.
URW's game plan for Garden State Plaza — as well as Westfield Old Orchard in Skokie, Illinois, and Westfield Mongomery in Bethesda, Maryland — is to have joint venture partners for the redevelopment of those malls. In 2022, URW lined up Boca Raton, Florida-based Mill Creek Residential to work on Garden State Plaza. The goal is to team up with "best-in-class" mixed-use developers, Lowe said.
URW is close to finalizing a joint venture agreement with a development partner for Old Orchard and is "about halfway through" negotiations with a partner for Montgomery, according to Lowe.
Doug Arsham, Mill Creek's executive managing director of development in the East, told groundbreaking attendees it took "over $300 million to put this first phase in the ground," and cited the difficulty of getting financing deals done. But URW officials said that was just Mill Creek's investment, not including its, and the price is higher.
"There is substantial investment going in every year for the next foreseeable future [by URW]," Lowe said. "The next five years, we'll see substantial investment in Garden State Plaza."
At the event, he described Garden State Plaza as "a truly highly performing business." The 1.5 million-square-foot property stacks up well, nationally, according to retail analysts. It was built in 1957 and evolved from an open-air shopping center into an enclosed mall, with URW acquiring it 30 years ago, according to Lowe.
URW is exploring adding a hotel, medical offices and senior-living housing to Garden State Plaza in future phases of the redevelopment.
At the Old Orchard and Mongomery malls, URW so far has mainly been repurposing former anchor department store space. For example, URW purchased a Sears and a Macy's store in Montgomery with plans to demolish the Macy's and transform that part of the mall property into a street-facing outdoor destination.
At Old Orchard, a former Lord & Taylor is now home to an Arhaus and a Zara store, as well as a Puttshack indoor mini-golf location. There are also plans for a former Bloomingdale's to be demolished and replaced by about 360 apartments.
URW has purchased the large vacant Lord & Taylor at Garden State Plaza and has plans for that space, which Lowe said he can't disclose yet.
The retail landlord has narrowed down its U.S. holdings to 15 malls, with about a dozen of them considered flagship properties and the rest as regional malls. Almost a year ago, Lowe told CoStar News that URW was likely to divest one of its regional malls,
Westfield Wheaton in Wheaton, Maryland. URW had defaulted on a loan for that property, but it's now secured financing and paid off that debt, according to Lowe.
While its regional malls are non-strategic assets, they are not distressed properties, he said.
"We don't have to sell them," Lowe said.
But he added, "If we find the right buyer, we would do it."