Irreplaceable Retail
American Assets looks for properties with high barriers to entry and demographics that are off the charts.
Randall Shearin

Finding properties that are in locations that just can’t be duplicated can be difficult and time consuming. That’s why American Assets, Inc. only acquires a few properties every few years. San Diego-based American Assets is a company that believes in investing only in irreplaceable properties. That said, the company looks for dominant centers that have a unique location with high barriers to entry or that have legislative or environmental hurdles that prevent future competition.

Shopping Center Business recently met with John Chamberlain, CEO, Chris Sullivan, vice president of leasing, and Patrick Kinney, vice president of operations to find out about its recent projects.

The state of Hawaii is at the forefront of recent activity for American Assets. Because part of its investment criteria includes markets with high barriers to entry, the company sees Hawaii as an ideal market for it to be involved. American Assets has recently made three investments in the state, and sees plenty of opportunity for a bright future in the market.

“Hawaii has a limited supply of real estate and a demographic profile that is unmatched anywhere else in the U.S.,” says Chamberlain. “Most any project should have positive prospects for years to come, especially in the Waikiki area.”

American Assets, Inc. is adding a professional building to its popular Waikele Center in Hawaii.

American Assets has purchased a center on the west side of Oahu called Waikele Center. While the 521,332-square-foot center would be considered somewhat typical elsewhere in the U.S. — its anchors are Lowe’s Home Improvement Centers, Kmart, Borders Books, OfficeMax, Sports Authority and Old Navy — the center sits on the frontage of one of only two highways in the state and has very strong demographics.

“It is a pretty rare commodity,” says Chamberlain.

When American Assets acquired Waikele Center, there were development rights in place for an additional building. The company is now underway with a 17,500-square-foot building that will add some professional office/retail space.

The second opportunity American Assets realized in Hawaii was with its acquisition of the Shops at Kalakaua, a 12,000-square-foot specialty center at the heart of Waikiki’s famed shopping and tourism area.

The famed Waikiki Beachwalk has recently undergone an extensive renovation that includes a two-level retail/entertainment complex, designed as the centerpiece of the large open-air plaza.

Another rare commodity that the company has become involved with is Beachwalk, a retail development with partner Outrigger Hotels. Along Lewers Street in Waikiki Beach, Beachwalk is designed as a place where tourists can experience Hawaiian culture through retail. The mixed-use project was specifically designed so that most of the retail tenants were local, Hawaii-focused retailers and restaurants. Tenants include Crazy Shirts, Wyland Galleries, Folli Follie, Sunshine Swimwear, Maui Divers Jewelry, Na Hoku and Mana Hawaii Spirit. Restaurants include Roy’s Waikiki, Ruth’s Chris Steak House, Yard House and Kaiwa Japanese restaurant.

“We made a big effort to bring in high quality, local, entrepreneurial tenants,” says Chamberlain. “The intent was to create a Hawaiian experience, not just another typical American mall. A number of independent high end tenants including jewelers, softgoods, lifestyle home furnishings and restaurants make up the center. This really differentiates the project from the rest of Kalakaua Avenue [the main shopping district in Waikiki Beach], which contains numerous luxury tenants like Ferragamo, Prada and Coach.”

Beachwalk is surrounded by hotel space. Two Embassy Suites towers anchor the middle of the project, which consists of 93,000 square feet of retail and restaurants at the base of the towers. In effect, the project will also serve as the lobby for the two hotel towers. Lewers Street is the main street for the Waikiki Beach area. Two main streets that lead from Kalakaua to the beach are Lewers and Beachwalk, and the Beachwalk development sits between them.

“The way that Beachwalk was designed — across from the Royal Hawaiian Mall — it was meant to be a magnet for people walking along Kalakaua,” says Chamberlain.

Outrigger Hotels, the largest hotel chain in Hawaii, was the driving force in the 10-year process to build Beachwalk. One of the hallmarks of Outrigger’s hotels is that it generally partners with local retailers and restaurateurs to open unique spaces for its guests. Outrigger has also undertaken an entertainment program for Beachwalk. A venue will allow performance space for local entertainers so that guests will be entertained as they shop. This space will be programmed nightly with local, recognized artists.

The first phase of Beachwalk opened in January and has continued to open tenants throughout the spring. By the end of this month, the center, which was 100 percent leased before completion, will be fully open. Waikiki, meanwhile, continues to boom. In 2006, a record 7.4 million tourists visited Hawaii, spending over $12 billion.

With the success of Waikele Center and Beachwalk, American Assets is looking for further properties in the state.

“We would like to acquire more properties in Waikiki,” says Chamberlain. “We continue to have talks with other groups about joint ventures where we would be the active partner.”

California Pizza Kitchen opened its new concept store at Del Monte Shopping Center in Monterey, California.

Back on the mainland, American Assets is continuing with the development of its Del Monte Shopping Center in Monterey, California. The company has invested $20 million in the retenanting and remodel of the 676,000-square-foot regional center. The center is part regional lifestyle center, part community center. American Assets has been adding lifestyle tenants to the center since it acquired it in 2003. The company also plans to add further retail space to the center. American Assets has retenanted 60,000 square feet at the center. It is evolving the center to serve the affluent population in Monterey. For instance, it is replacing a Marie Callender’s restaurant with P.F. Chang’s China Bistro. Islands Restaurant is replacing Fresh Choice. The company is also bringing in retailers like a national upscale home furnishings store and fashion tenants like White House|Black Market, lucy and Ann Taylor. The Whole Foods store at the center is too small to serve the population, and American Assets hopes to expand the store in the future. The company also wants to create a pedestrian area between the center and the theater. A playground and carousel are also other amenities that may be added in the future.

“Monterey will be a project that, as leases roll over and we create additional space, will continue to adjust to meet the needs of the community,” says Vice President of Leasing Chris Sullivan.

American Assets, Inc. recently added Panera Bread to its Solana Beach Towne Centre as part of a $6 million renovation.

The company has also made a major investment in expansion of its Lomas Santa Fe shopping center in Solana Beach, California. At the 214,000-square-foot Lomas Santa Fe shopping center, a lifestyle development is planned. Across Interstate 5 from Lomas Santa Fe, American Assets also owns Solana Beach Towne Centre, which is also under expansion, with a new building being added, and receiving a façade upgrade. American Assets has done all of the work at Solana Beach Towne Centre with the tenants in place. The company looks at these two centers as 3-year strategic turnarounds because of lease turnovers and additions to the project.

“Overall, American Assets’ retail portfolio has less than 1 percent vacancy,” says Vice President of Operations Patrick Kinney. “Most of our large centers are 100 percent occupied.”

Pictured from left to right are Patrick Kinney, VP Retail Operations; John Chamberlain, CEO; Jerry Gammieri VP Construction and Chris Sullivan, VP Leasing.

American Assets does all of its own construction, leasing and marketing in house. The company also manages its centers.

In addition to its 3.7 million square feet of retail space, American Assets is also involved in the office sector. On that side of its business, the company has recently acquired two Class A office buildings in San Francisco. The company acquired The Landmark at One Market Street in downtown San Francisco. The building was built for Southern California Railroad in 1917. The building was occupied by the railroad until 2000, when it underwent a renovation and structural upgrade, and was later leased as multi-tenant space. The company also acquired 160 King Street, a 168,000-square-foot Class A office building near PacBell Park in San Francisco. The company also owns more than 1,000 residential apartment units.


©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.