Center Hopes Circuit City Will Spark Business : Sweetwater Town & Country Owners, Tenants Look for Turnaround With New Anchor Store
Can a single “anchor” tenant revive an ailing shopping center after years of decline?
Henry Michan and his two brothers, Mexican-born real estate owners and developers who last year bought Sweetwater Town & Country in National City, are about to find out. They recently signed Circuit City, a highly successful nationwide retailer of consumer electronics and appliances, to a 21-year lease in the center.
The trio purchased the 218,000-square-foot complex for $13.5 million a year ago and had been looking for a major anchor tenant such as Circuit City to turn the ailing center around. Sweetwater fell on hard times when Safeway--its major draw--left in early 1987.
Once the supermarket departed, so did customers who were the lifeblood of Sweetwater’s other retail tenants. Several other tenants also followed suit. In the western half of the shopping center, where Safeway had been, 28% of the retail space became vacant.
Vagrants Huddling in Cars
Like falling dominoes, one problem after another hastened Sweetwater’s decline. By late last year, vagrants were huddling in abandoned cars that littered the parking lots. Graffiti stained the buildings, and roofs leaked.
Even with those problems, the Michan brothers believed that Sweetwater represented a golden opportunity. Nestled between two major freeways--Interstate 805 and California 54, also known as the South Bay Freeway--Sweetwater occupies a choice piece of real estate in a growing retail sector of booming South Bay, Michan said. All it needed, Michan reckoned, was a face lift and the right anchor tenant to bring the customers back.
When a Los Angeles-based development firm that had purchased Safeway’s lease recruited Circuit City, half of the center’s problems had been solved. Or so the Michans hope. Circuit City opened its doors to customers Aug. 10, and it’s still too soon to say whether the store can reverse Sweetwater’s decline.
Based on the experience of other shopping centers that have leased space to Circuit City, the Michans have reason to be optimistic.
“One look at our parking lots once they moved in, and we knew they were responsible for a significant increase in customer traffic,” said Kris Hoffman, president of Albert B. Glickman & Associates, a Beverly Hills real estate development and property management firm. The firm is the managing partner for Montebello Plaza and Bakersfield Plaza, both of which are 300,000-square-foot shopping centers with Circuit City as tenants.
“At the time when we brought in Circuit City, both of the shopping centers were more than 10 years old,” Hoffman said. “Circuit City gave them both a boost. We didn’t do any studies, but a seat-of-the-pants impression is that Circuit City drew more people than the previous tenants.”
‘Anybody Would Be Pleased’
Della Chadwell agrees. She is manager of Huntington Center in Huntington Beach, which features a 20,000-square-foot Circuit City store. “It’s the heart of our lineup,” she said. “I think anybody would be pleased with their presence.”
But skeptics, including some of Sweetwater’s other tenants, aren’t so sure that Circuit City is the long-awaited savior. Some say that signing up a another supermarket would have drawn more customers.
“If I was building a shopping center, I would rather have a supermarket than Circuit City,” said Gary Fusco, vice president of the Sweetwater Town & Country Merchants Assn., which represents most of the center’s tenants. “Circuit City might bring in somebody from Escondido maybe three times a year. But how often do you go grocery shopping? A supermarket would bring in customers more suitable for the other tenants, more regulars.”
But even Fusco, who operates a Swensen’s ice cream parlor and sandwich shop at Sweetwater, agrees that bringing in Circuit City is a step in the right direction and better, as he put it, than no major tenant at all.
Jon Bilger, a Coldwell Banker commercial real estate broker who specializes in retail space, said that just bringing in a successful tenant is not enough to keep a center thriving; proper maintenance and security are also imperatives.
“Circuit City is a big advertising tenant--they take a lot of ads in the paper,” Bilger said. “They create a lot of business for themselves and, as a result, they’ll create more activity for the center. I don’t know if Circuit City will cure all of Sweetwater’s problems, but it’s a big step toward solving them.”
Highly Regarded Chain
Since its founding in 1949, Circuit City has grown to 133 stores in 13 states and is commonly regarded as one of the best-run retail chains in the nation. Nearly a third of the outlets are in California, including two San Diego County stores that opened last month. The other local location is at Midway Drive and Rosecrans Street in Point Loma.
For the fiscal year ended Feb. 28, the Richmond, Va.-based company posted revenues of $1.72 billion and profits of $69.5 million, according to company spokeswoman Ann Collier. The previous year, the publicly owned firm recorded revenues of $1.35 billion and earnings of $50.4 million. The company expects 20% to 25% growth in sales this year.
According to city leaders, Circuit City will post nearly $20 million in annual revenues at the Sweetwater location, twice the amount a successful supermarket would generate.
Those expectations account for Michan’s confidence that his gamble will pay off. To tip the odds in his favor, he and his brothers spent $500,000 to spruce up the center’s image. The make-over included new lighting, improved landscaping, a fresh coat of paint and more visible signs.
Still, the center has a history of problems and a negative image to overcome, neither of which are quickly erased from shoppers’ minds.
Trickle of Customers
The history began when Safeway decided to leave Sweetwater in 1987 as part of a decision to withdraw from the Southern California market. Once Safeway left, customer flow at the center slowed to a trickle, causing some retail tenants to become “midnight movers,” leaving in the dead of night.
Many of those that remained became disgruntled and criticized the center’s previous owners for failing to quickly recognize the detrimental impact of Safeway’s departure. Tenants also complained that the shopping center was poorly maintained.
The center reached its nadir when the members of the Sweetwater Town & Country Merchant’s Assn. filed a lawsuit in 1987 against the owners, alleging poor management. According to Fusco, the group’s vice president, some members even staged a “tenant strike” and temporarily refused to pay rent.
The Michans have installed a powerful lighting system and are adding self-illuminating signs to the center. The center is also being repainted in lighter colors, said Frank Vogel, the center’s property manager.
“People are sophisticated shoppers,” Vogel said. “They want to go someplace that is clean, secure and attractive. That’s what we’re doing.”
According to sources close to the transaction, Circuit City was provided incentives to move into Sweetwater when a Los Angeles firm that acquired Safeway’s lease agreed to pay $1 million to finance building improvements, including installing a new roof, improving electrical systems and adding a 3,500-square-foot warehouse.
New Tenants Attracted
However, Collier, the Circuit City spokeswoman, declined to confirm such details, saying the company does not disclose the terms of its lease agreements.
Some say the incentives were well worth it. During its short stay so far, they say, Circuit City has not only drawn more customers to the center but has also helped recruit new tenants, Vogel said, adding that three of the seven vacancies have been filled since Circuit City arrived.
One of the three new tenants is Buhrow Into Dive & Surf, a scuba gear and surf shop. For nearly six months, owner Robert Buhrow had been searching to relocate from another part of National City. Although he was already leaning toward moving into Sweetwater because of its location, he signed the lease when he learned that Circuit City would be his new neighbor.
“That was the icing on the cake,” said Buhrow, who will open his new store Oct. 1. “Circuit City moving in had a good impact on my decision. It’ll draw the client that I’m looking for--young ones that go for the boom boxes . . . customers that are a little better on the monetary bracket.”
