Commercial Real Estate and Shopping Centers and Retail Development and Lafayette Square and Retail and Real Estate & Retail

New Lafayette Square owner pitching major expansion

May 26, 2008

Lafayette Square Mall could look a lot like the revitalized Glendale Town Center in a few years if the mall's new owners get their way.

A proposed site plan shows that New York-based Ashkenazy Acquisition Corp. doesn't intend to settle for filling the mall's ample vacant space. The firm is trying to pull off a retail expansion of about 300,000 square feet and also is considering office, medical or hotel uses for the 113-acre site at Lafayette Road and West 38th Street.

A site plan suggests a Target to replace the vacant JCPenney, a Lowe's in the mall's northeast parking lot, along with several midsize retailers, including DSW and PetSmart.

A family-amusement center tentatively called Blast! would fill the first floor of the old Lazarus with go-karts, bowling, bumper cars, laser tag and mini-golf. Ashkenazy also hopes to pick up several restaurants, including Wings Etc., Jimmy John's and Chipotle attached to the mall and possibly Chick-fil-A, Panera Bread Co. and others in front of it.

The developer hasn't negotiated any deals yet, but the prospect of revitalization for the 1.2-million-square-foot mall has neighborhood leaders thrilled. They're encouraged by Ashkenazy's plan--whether or not the developer lands its wish list of tenants--to spend $12 million on upgrades, including a new facade, sign and interior improvements.

"It's fabulous," said Mary Clark, president of the Lafayette Square Area Coalition. "It's going to be a really big boost to the area."

Ashkenazy bought Lafayette Square in December for an undisclosed price from locally based Simon Property Group Inc. Though Simon gave Lafayette Square an $18 million face-lift in the mid-1990s, the property has shed tenants over the past decade. By last year, the vacancy rate had climbed to nearly 20 percent.

Misunderstood mall?

The area could benefit from Ashkenazy's sales pitch that describes the Lafayette Square retail market as misunderstood. About 91,000 people live within a three-mile radius of the mall, nearly 20,000 more than the neighborhoods surrounding Glendale Town Center, said local real estate broker Ryan Zickler, who is consulting with Ashkenazy.

Locally based Kite Realty Group Trust is in the final stages of a $32 million overhaul of Glendale, which will include the addition of a Target store and numerous smaller shops. A Lowe's opened on the south end of the mall in 2000.

The average household income in the Lafayette Square area is about $53,000, which is above the state average but below the Glendale average of $77,000. About $500 million per year in consumer spending "leaks" from the Lafayette Square area to better-served retail areas, Zickler said.

The demographics for Lafayette Square are in line with Indiana as a whole in just about every category but race, said Clint Fultz, a principal with locally based Prime Site Brokers, who also is consulting with Ashkenazy. About 42 percent of the area's population is black, a factor Fultz believes plays a role in why the area has been underserved.

Another factor is a perception of crime, even though the area ranks second lowest of Indy's six districts. Fultz likes to point out that there are four private golf clubs and eight public courses within five miles of the mall.

"Everyone in town has an idea of Lafayette Square," he said. "The facts are quite different from the perception."

Wal-Mart effect

Another selling point is momentum. To the north, a new Wal-Mart has thrived, Garden Ridge just replaced a long-vacant Builders Square store, and the neighborhood got its first Starbucks. The area also is a Community Revitalization and Enhancement District, a designation that offers tax breaks for development.

"Wal-Mart set a precedent over there," said Brian Epstein, president of locally based Urban Space Commercial Properties. "I think it's certainly feasible that the other big players would follow."

The developer also is looking at Dick's Sporting Goods and Gander Mountain as potential tenants, Zickler said.

Adding more retail space is one of a couple of scenarios Ashkenazy is exploring to better use the site. Another possibility is developing office space with "better parking and better rates" than elsewhere in town, Fultz said.

That plan calls for converting the old JCPenney store and the second floor of the old Lazarus to office space and adding another office building where the retail plan shows a Lowe's. The office scenario would result in about 500,000 square feet of space. Hotels and medical uses are other possibilities.

It's all a work in progress, Fultz said.

"No development plan survives contact with a tenant," he said, adapting the military adage: "No battle plan survives contact with the enemy."

Some in the neighborhood felt the mall's previous owner, Simon, neglected the property, despite its investments to remodel and bring in new tenants such as Steve & Barry's University Sportswear.

But some brokers say the real culprit in the mall's slow decline is competition from newer projects, not the mall's owner. The 3-year-old Metropolis mall in Plainfield has sucked some life out of Lafayette Square, most notably by stealing former anchor JCPenney.

Awkward timing?

Timing could be another challenge to Ashkenazy's vision. Most major retailers, including Target and Lowe's, have scaled back expansion plans as the economy sputters. Lowe's trimmed its roster of planned new stores this year to 120, from 150. Target, which just reported a 7.5-percent drop in first-quarter profit, plans to scale back its new-store openings about 30 percent.

Then there's the skeptic's question: If Simon--the nation's largest and most powerful mall developer--couldn't pull off a turnaround of Lafayette Square, how does a New York company expect to succeed?

The new owner has a plan: Work with the neighborhood, pitch Lafayette Square to anyone who will listen, and invest the money necessary. The privately held company has 13 million square feet of retail, office and residential properties across the United States, including Barney's stores in New York, Beverly Hills and Chicago.

The firm also seeks turnaround opportunities, a strategy Simon generally avoids.

"They were never willing to do what we're willing to do," Amanda Royalty, Lafayette Square's marketing coordinator, said of Simon, her former employer. "They didn't have the tenacity that we have."

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