WEST PALM BEACH, Fla. - Could the shabby Palm Beach Mall soon be transformed into a glamorous center for high-fashion outlet stores?
Last month, the partnership that plans to buy the entire site in September unveiled its plan to redo the mall on Palm Beach Lakes Boulevard near Interstate 95.
The vision: The Palm Beach Fashion Outlets, 1 million square feet filled with regular, big-box and high-end outlet stores. An opening is slated for 2013.
In an interview Wednesday, billionaire mall magnate Stephen Karp, one of the developers behind the makeover, said he believes shoppers would welcome outlet stores.
"You have to go to Sawgrass (Mills in Sunrise) or Orlando to get these first-class outlets," Karp said. "I think this will be really good for West Palm Beach."
Karp stressed that tenants such as Saks Fifth Avenue Off 5th, which were unveiled at the International Council of Shopping Centers convention in Las Vegas, have not signed leases. At this point, they are highly interested prospects. But the more high-profile tenants express interest, the more attention the property attracts from other major prospects, real estate experts said.
Karp is chairman and founder of New England Development, a Newton, Mass.-based firm that has partnered with Eastern Real Estate of Woburn, Mass., in a joint venture to buy the mall.
Their marketing material boasted a number of premium outlets, including Nordstrom Rack, Bloomingdale's Outlet Store and Neiman Marcus' Last Call. Other outlets listed are Nike, Gap, Old Navy and Ralph Lauren.
In addition, a rendering lists Bass Pro Shops, the outdoors store that long has sought a spot in West Palm Beach; and H&M, the sizzling clothing retailer that has made a splash at The Gardens Mall in Palm Beach Gardens.
Several big-box stores, including TJ Maxx, Bed Bath & Beyond and the Christmas Tree Shops, are listed on a rendering. A Burlington Coat Factory also is listed.
The property is mostly owned by Dallas-based ORIX Capital Markets, which took control after Simon Property Group let the mall go into foreclosure in 2009.
But ORIX does not own the Macy's and Dillard's department stores properties. Those pads are owned by the stores, a fractured arrangement that has stymied efforts to redo the mall.
However, the New England/Eastern team now has all three properties under contract, said John Marshall, an associate director at ORIX. A closing has been pushed back a couple of times but is set for September, Marshall said.
"Anything can happen between now and then, but I am optimistic we are going to close," Karp said.
Word is the New England/Eastern venture is buying the properties for $30 million to $35 million. Neither Marshall nor Karp would confirm that number. It is substantially less than the $55 million in loans that were the subject of the foreclosure.
Karp said his team still is doing due diligence on the property, which would undergo an extensive exterior and interior renovation.
West Palm Beach Mayor Jeri Muoio said she likes the idea of using the existing mall framework to create an outlet center and especially likes the presence of the premium outlet shops.
"It's exactly what we need," Muoio said. "It'll draw traffic to this area, and it's an excellent location."
Like most city leaders, Muoio is keen to see the mall property transformed into a mecca of commerce and jobs. The bulk of the mall, once a thriving retail center, was shut down in April 2009, after Simon cleared out most tenants in anticipation of a planned redevelopment. When the recession took hold, the renovation was abandoned and Simon let the mall go into foreclosure.
Today, only JCPenney and George's Music remain open, with the rest of the 80-acre property a ghost town. Recently, JCPenney erected a sign that said "Here to Stay."
New England, Eastern and ORIX all have been mum on the mall's fate, so several local brokers who attended the convention were surprised to learn about the mall's makeover.
But the brokers also concluded the big box/outlet idea could work.
Richard Lackey, a broker at Palm Beach Gardens' Lackey Cos., attended the ICSC convention. He predicted the Fashion Outlets would attract shoppers from a wide area because it would create a mass of stores not clustered elsewhere in the county.
"People will drive from the north end and the south end," Lackey said.
Some retail brokers said J.C. Penney Co. typically does not like to be near outlet stores. Tim Lyons, a spokesman at the company's headquarters in Plano, Texas, said the retailer has been shutting down some of its own discount stores in recent months.
But Karp said discussions with J.C. Penney have been positive.
South Floridians might not have heard of Karp, but he is familiar with Palm Beach County. He owns a home directly north of the former Kennedy estate in Palm Beach and he acknowledged his company has a small stake in the CityPlace shopping center in West Palm Beach.
Karp is a major player in the retail business and is worth $1 billion, according
to Forbes magazine. In 1999, he sold 14 malls to Simon for $1.7 billion.
Karp said he recently entered the Palm Beach Mall deal, which mostly had been handled by Eastern Real Estate's Brian Kelly. Kelly and a partner are known for their stunning flip of the former Wang corporate headquarters in Lowell, Mass. They bought the property for $525,000 in 1994, then sold it four years later for more than $100 million.
Although the New England/Eastern team appears as if it will close this deal, "there are plenty of backups" if it doesn't, Marshall said.