By Jon Peterson
North Miami Beach, Fla.-based Equity One is planning a redevelopment of the Serramonte Center retail project in Daly City that is likely to cost between $80 million and $100 million, according to the company’s 2014 fourth quarter results conference call.
“We are now scheduled to be in front of the Daly City Council this summer for our project entitlements,” says David Lukes, chief executive officer for Equity One during the conference call.
The city of Daly City is expecting something to happen a little sooner. “There is going to be a preliminary planning review of the redevelopment project on March 3rd. There will be a few more meetings after this including an environmental impact report before the redevelopment would be approved. I do think in general that the redevelopment would benefit the city by adding to the sales tax revenue that Daly City already receives from the project,” says Tatum Mothershead, interim director of economic and community development for the city of Daly City.
Mark Langer, executive vice president and chief financial officer did not respond to several phone calls seeking comment for this story.
Equity One is projecting the redevelopment to produce a good return for its shareholders. “We are expecting the project to achieve an 8 percent unlevered return on the increment cost of the project,” said Lukes during the conference call.
The redevelopment plan calls for a significant amount of new space being added to the property. “Our plan is to redevelop the mall and develop the perimeter land for a net additional 200,000 square feet. This would represent a 20 percent increase in the property size. A successful completion of the redevelopment would likely increase the full property net operating income by 40 percent,” said Lukes on the conference call.
Equity One has already started talking with tenants about taking some of the additional space. “We are currently in lease negotiations with tenants totaling 80,000 square feet, and we are exchanging letters of intent for an additional 80,000 square feet,” said Lukes. The existing property has been performing well for Equity One. The in-line tenant sales are at $477 per square foot, and the property is 97 percent occupied.
The land at Serramonte Center is roughly 80 acres in size. During the past three years, Equity One has brought in several new tenants to the property. This includes Dick’s Sporting Goods, Uniqlo, Zumiez and several restaurant tenants. The property currently totals 895,438 square feet, and some of its major tenants are Target, JCPenney and Macy’s.
Equity One is a publicly traded real estate investment trust that owns major retail properties across the country. The company has ownership of 11 properties in California totaling 2.4 million square feet, according to its Web site. Serramonte Center is its largest property it owns in the state of California.