Macy's Continues Lawsuit Against Horton Plaza Redevelopment
Speaker 1: 00:00 If you walk by Horton Plaza mall, you'll notice not much is there. Most people like in the 10 block property to a ghost town, but Macy's, one of three retailers left in the mall is working to hold on to whatever life it can, which is why a plan to turn Horton Plaza into a mixed use office campus was met with a lawsuit from Macy's. The retailer wants Horton Plaza to remain a retail space while the city and developers want to transform it into offices that will house high paying tech jobs. Joining us with [inaudible], Jennifer van Grove of the San Diego union Tribune. Jennifer, welcome. Thank you for having me. And you've been covering this. Tell us first about the Macy's lawsuit and the city's reaction to it. What's the basis of the suit? So it's, it's a little complicated, but Macy's is a party to what's called a reciprocal easement agreement. And these are agreements that are, they're pretty outdated as far as retail goes. Speaker 1: 00:55 But, um, they were popular in the 80s, which is when, um, well actually Macy's predecessor was involved in the agreement and it involved all of the anchor tenants, so it was Nordstroms and a couple other, the department of the store is, I believe Mervin's, but they're all a party to this agreement, which essentially gave them veto rights over major redevelopment at, at the mall, at O at Horton Plaza. And since that's all we're talking about, time has gone by obviously, and Macy's is the only department store left and they have this agreement but they don't feel like their rights are being acknowledged by Stockdale, which came in and purchased Horton Plaza last year. And the new owner of the mall is Stockdale capital partners as you mentioned. What is their vision for Horton Plaza? They see Horton Plaza, so they would like to what's called, um, adaptively reuse the building. So not tear everything down, but kind of strip it to this duds and remake it as a office, uh, campus. Speaker 1: 01:59 And so, um, like nearly 800,000 square feet would be used for office. They would add four floors to the Nordstrom building. And then on the ground floor they would do complimentary retail. So it wouldn't be like boutiques. They would be more food and beverage and fitness concepts. And what do they say it will cost? Well they won't tell me a number actually, but you know, just through various documents that have come, come up through my reporting and it looks like they have a line and I'm of $275 million for this project, it'll probably go up and they, um, they already spent 175 million buying the land. So we're looking at a half a billion dollars or more here. Wow. And Macy's did not buy into the Stockdale plan and indeed, uh, has been critical of it. Why? It's complicated. So if you ask Macy's directly, first of all, they, they don't like talking to me. Speaker 1: 02:51 So I always get statements or get copies of letters. So I never get a direct answer. The answer that they've said publicly through a lawyer, um, back in April was just that they had, they did not have enough detail. They didn't think that Stockdale was communicating with them and that ultimately, you know, they, they just weren't bought into the project. However, you know, it could be more complicated than that. I talked to a local real estate analyst here at Gary London. Um, he believes this comes down to money. So Macy's has a longterm lease in place, plus they're a party to this really this really important, uh, document, the reciprocal easement agreement. And so because of those two factors, he, he told me that Macy's probably expects a pretty big payout here, um, that they probably do want to leave the mall, but they want to be paid to do so. Speaker 1: 03:46 Do we know how Macy's wants to influence the redevelopment? I mean, do they want to stay in that location? What are they hoping will happen? You know, you just mentioned they may want to leave, right? So I don't know directly from them. I think some of the comments that they've made is that they're excited about the potential revitalization of the mall and they refer to it as a shopping destination. However, there is a lot of value in those leases. And Macy's is in a pretty precarious, um, moment in time as far as retail goes. I know elsewhere around the country, they are redeveloping their own stores and talking about, I'm adding office space on top of retail or, or experimenting with different concepts. So it's hard to know exactly what they would want to do at Horton Plaza, but they, um, they're in a difficult situation as it is because we're, we're coming up on the holidays and it's really just them. Speaker 1: 04:40 They're the only store left. You can go shop at grocery, um, or at Jim PO's for groceries and you can go workout at 24 fitness, but the only store to actually go buy anything is at Macy's. And so, um, that's gonna really affect their holiday sales at that location. And you just mentioned they're just, they're one of three retailers that are left in Horton Plaza right now. Um, is demolition is demolition going on right now? Yeah. So interior demolition is going on. And actually there's been a lot of work that's already been done. I got to tour the property. So much of Nordstrom's has been demolished on the inside as they make way to add four stories on, um, the old food court, all the interior that has been demolished. Um, and then they're also doing demolition inside some of the other storefronts. But work is going to come to, um, a halt probably by the end of the year if this lawsuit is not wrapped up. And that's because the financing that Stockdale needs to move forward with their project. They don't have that secured yet and it'll be very difficult for them to secure a lender with this type of litigation hanging over their head. Sounds like something that will be ongoing for a while. I've been speaking with Jennifer van Grove of the San Diego union Tribune. Jennifer, thank you very much for joining us. Thank you.
