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TACOMA SUBURB CHEERS MALL’S REPLACEMENT

BY LEE KESSLER

Residents of the Tacoma suburb of Lakewood, Wash., do not remember the old Lakewood Mall kindly.

It was “a tomb,” recalls William Harrison, mayor of the 58,580-resident city.

One of the first issues Lakewood faced after seceding from Tacoma in 1994 in a bid for local autonomy was the fact that the moribund enclosed mall was giving the area a bad name. High vacancy rates made the place look like a ghost town and attracted loiterers.

“People judged us by the mall,” said Harrison. “Even though our business licenses were increasing, people thought we were dying.” The matter was all the more significant because Lakewood residents were anxious to earn their wings as an entity independent of Tacoma.

The mall’s department store anchors — The Emporium, Lamont’s, and Frederick & Nelson — had closed, and there were plenty of vacancies among the in-line retailers, too. A few of the interior spaces had never been built out and still had dirt floors, owing to the death of the mall’s owner before its completion. Some of the tenants were on rent relief or month-to-month leases. Retailers that shared the site with the mall, including Barnes & Noble, Cineplex Odeon, Gottschalks, Safeway and Target, weren’t thrilled about the state of the center either.

Wells Fargo held the property in receivership with a debt exceeding $70 million and marketed it fairly aggressively. But it was a tough sell, even though the location — 100 acres of contiguous retail-zoned property on the Puget Sound — was attractive. Prospective developers pulled up, took a look, then left. All except one.

“We had looked at the site several times over the years,” said Mason Frank, president of MBK Northwest, a subsidiary of Mitsui & Co., which ended up buying the property for $28 million in 2001. “We saw something different than the other developers.”

For starters, MBK had no intention of keeping the mall.

“Our idea was to de-mall, to just tear it down and start all over again,” said Frank. In its place the company is building Lakewood Town Center — a power center, a neighborhood center and an entertainment destination, all on the lot that now houses Lakewood’s first city hall.

The project’s first phase, completed in the summer of 2002, included work on the infrastructure, construction of the city hall, demolition of the mall and its replacement with five new buildings, as well as the refacing of some of the existing perimeter retail. The second phase, set for completion this fall, includes construction of the middle section of the power center, which houses Burlington Coat Factory, Office Depot, PetsMart and Pier 1 Imports. Completion dates have not been set for the third phase, which will complete the power center, or the fourth, which will revisit the movie theater for upgrade or for demolition and reconstruction. The fifth and final phase will create a new destination area, possibly for home furnishings.

MBK might never have bought the property without a commitment from the city to help bring the area back. One sign that the municipality was interested was its purchase of a five-acre parcel for the city hall in 1999.

The city of Lakewood also committed to hiring more staff and outside consultants to facilitate permitting, which was essential, given the tight deadline for completion of the first phase.

“We had six months from the time we had our wrecking ball show up until we had promised our tenants they’d be open for the holiday season,” said David Moore, the MBK Northwest senior vice president who handled much of the negotiation. “When we needed expediting, we got it. Our permits were treated with priority. The city didn’t bend any rules for us, and they didn’t give us anything for free. But there was a spirit of cooperation top to bottom, because both sides saw there was mutual benefit here.”

In addition, the city built Main Street (comprising the city hall, a few other buildings and a traffic circle intersecting with a newly extended 59th Street), improved the Northeast corner entrance and helped MBK deal with a number of state agencies.

“Every project we’ve done, people within the industry have said we’re crazy — on the front side,” said Frank. (Two of MBK’s other area redevelopments are Parkway SuperCenter, Seattle; and Jantzen Beach SuperCenter, Portland, Ore., both of which the company subsequently sold.) “But we’ve learned how to do these re-developments. Knock on wood, they’ve all been successful. So we’ve kind of found a niche up here for ourselves.” Citing the scarcity of land for new development in the Pacific Northwest, Frank says he believes that redevelopment will become increasingly common.

Lakewood, a city that broke away from Tacoma, now flaunts the power center, community center and movie theater that have replaced an old mall.

But the company does not take the risks inherent in such projects lightly.

“We did a year and a half of predevelopment and due diligence on this project before we even owned it,” said Moore. “We had to negotiate 24 termination and/or relocation agreements with existing tenants before we could bring in the wrecking ball.”

By the time MBK bought the property, all the terminations and relocations were in place, and the new space was about 75 percent pre-leased for the first phase. Among the bigger tenants were Barnes & Noble, Bed Bath & Beyond, Old Navy, Safeway and Target.

The first-phase grand opening in August 2002 featured a display by the Flying Elvi (skydiving Elvis Presley impersonators), no less.

“Across the board in our first phase, we have had every retailer meet or exceed their business plans,” Moore said. “Safeway has been way over. And we’ve had existing tenants like Target and Gottschalks, who have reported an increase in sales attributed to the redevelopment.” He declined to disclose any figures.

Tenants that had bemoaned the state of the old mall have responded to the reconstruction. Moore says Target is completing a $6 million remodeling of its store, and Barnes & Noble has done an upgrade as well. Restaurants will be added too, with the first ones set to arrive by year-end, though Moore declined to name them.

“From the very beginning, Lakewood has been a retail location,” he said, citing the old Liberty House department store that existed there in the late 1940s. “We want to bring Lakewood back as a legitimate retail destination.”

Mayor Harrison sees it happening already. “Citizens stop me on the street and say, ‘Bill, the new center is just great.’ I look out the window and there are cars coming and going — it’s just bustling with activity.”

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