The open-air retail center
features shops and entertainment
venues in a lavishly constructed
setting.

ANAHEIM, CA-An investor group formed by Arcturus Group and Avenue Capital Management has purchased Anaheim GardenWalk, a 450,000-square-foot retail lifestyle center here, with the intention of repositioning it. The sales price was not revealed to GlobeSt.com, but industry sources unrelated to the deal report that county records show the new owners took out a $65-million mortgage on the property. Elliott Management has also joined the group in the acquisition.

The open-air center, acquired from Citigroup Inc., is located just steps from the main entrance to Disneyland Resort and the Anaheim Convention Center and features shops and entertainment venues such as 300, a themed bowling alley; UltraLuxe Cinemas; and several national restaurants including The Cheesecake Factory, P.F. Chang’s, California Pizza Kitchen, McCormick & Schmick’s, Roy’s Hawaiian Fusion and Bubba Gump Shrimp Co.

GardenWalk, a lavishly constructed trophy property, was developed and opened prior to the economic downturn in 2008. The property subsequently became financially and operationally distressed and soon after went through foreclosure proceedings in 2010. As a result, the mall has remained approximately 50% occupied over the past two years.

The joint venture plans to execute a new strategic business plan that includes thoroughly revamping operations and marketing as well as “an aggressive repositioning plan and lease-up,” according to a company press release. Arcturus will oversee day-to-day property management and business-plan initiatives, with Bruce Macleod, head of the firm’s retail group, directing retail strategy and managing operations along with James Selonick.

Jonathan Mayblum, co-founder of Arcturus, tells GlobeSt.com that Gardenwalk was originally conceived to be focused on traditional retail and not necessarily capitalizing on the type of traffic that Disneyland generated. “Originally, it was going to be approximately 30% restaurants/entertainment, 70% retail. Since completion of the project, there has been a zoning change, and that ratio is now reversed.”

Mayblum adds that the firm is planning to support and capitalize on Disneyland/California Adventure and the Anaheim Convention Center and the visitors they attract to the area.

“The recent rezoning allowing more entertainment tenancy at the property creates enormous potential for GardenWalk as en entertainment-oriented retail destination given its design and location,” said Mayblum in the release. “Our group intends to unlock the potential of this magnificent, but previously financially challenged, asset by capitalizing on its proximity to the 20 million annual visitors to Disneyland, which recently invested over $1 billion on a major expansion, 15,000 hotel rooms and the largest convention center on the West Coast.”

Arcturus co-founder Matthew Stroyman added that the new ownership group possesses the operational expertise and has plenty of capital budgeted for tenant improvements and leasing commissions as well as several strategic capital-improvement projects. “This will be a real win-win for the investors, the tenants, the visitors to the area and the City of Anaheim.”

Mayblum tells GlobeSt.com that the repositioning effort has begun and that Arcturus has strong capital partners behind the project that can effectively support the capital improvements involved in repositioning the center. “The efforts will focus more particularly in connection with tenant improvement work and leasing conditions so that we have a strong and financially viable project.”

The new ownership has retained a joint venture of CBRE and the McGarey Group to help it sign restaurant and retail tenants. “The merchandising plan and leasing effort will be our focus in leading us to a successful project.”

With the distressed-asset inventory being so large over the last several years, whether to sell or lease REOs has been an interesting dilemma for lenders. In June, GlobeSt.com reported that Stroyman said the, options for a special servicer are loan restructure/workout, note sale, quick asset sale at or after foreclosure, and value-add after foreclosure with subsequent sale. “In analyzing a given loan, a special servicer is obligated to evaluate viable alternatives and determine which strategy will maximize the recovery on a net present value basis. In performing its analysis, the special servicer must consider the uncertainty of future cap rates and how they may be affected by larger economic and geopolitical trends.”

(Visit the Distressed Assets page on GlobeSt.com.)