Kushner Cos. has a new partner in its bid to remake its old-school New Jersey suburban mall, bringing in a seasoned retail real-estate company with a history of revitalizing malls.
The New York developer has joined forces with Rouse Properties, a company owned by affiliates of Brookfield Asset Management, as it moves to revamp the Monmouth Mall in Eatontown, N.J., into more of an open-air shopping village.
Renamed the Heights at Monmouth, the roughly $500 million project will feature a walkable streetscape, more dining and entertainment venues, and apartments.
"This is where malls are heading, and we need to transform it for the next generation," said Kushner President Laurent Morali.
The venture aims to get ahead of the changes buffeting the retail industry, which include consumers increasingly opting for online shopping and reducing the time they spend in malls.
The 1.5 million square-foot Monmouth Mall hasn't been hit with large vacancies like other malls across the U.S. But retail and real-estate analysts and brokers say even owners of top-performing shopping centers in strong locations are aggressively redeveloping their properties.
"The trophy landlords, though they don't have to do this today, they are moving today because they already have market share and dominance, and they aren't going to give it up," said Garrick Brown, national retail-research director for Cushman & Wakefield.
Mall and shopping center owners have gravitated toward the open-air format with fine dining and entertainment such as laser tag and Cirque du Soleil programs. The rationale: more time spent at these centers translates into more dollars spent, said Adelaide Polsinelli, a principal at real estate services firm Eastern Consolidated.
Mall developers and owners, whose main goal is to attract people to their centers, have brought in other components such as housing and offices as a way to ensure steady foot traffic and stable revenue, said Greg Portell, the lead partner in the retail practice of A.T. Kearney, a global strategy and management consulting firm.
Kushner's plans for Monmouth Mall go back at least to 2015, when it bought out the stake of Vornado Realty Trust, its former joint-venture partner in the mall, for $38 million. The Eatontown borough council approved zoning changes to the site that include up to 700 residential units, medical offices, indoor and outdoor dining, a food hall and entertainment uses such as a multipurpose plaza for performances, indoor sports facilities and a bowling alley.
Eatontown officials are eager to ensure the borough's largest taxpayer remains viable, said Mayor Dennis J. Connelly. Its total annual tax bill, which includes county, borough, school and library taxes, was about $5.1 million in 2016. Almost $1.9 million went to the borough.
The mall's largest draw has been its movie theater, he said. During the last holiday season, he said he noticed the mall didn't draw the sort of crowds and traffic it had in the past.
"Our town relies on the Monmouth Mall to survive, and we have for years, " Mr. Connelly said. "We need it to be successful today and in the future."
The mall also caught the eye of Rouse because of the similarity to one its properties on the other side of the country that is also undergoing a transformation, the company's chief executive, Brian Harper, said. The Shoppes at Carlsbad in Southern California boasts a dense and affluent surrounding population and a location just a few miles from the ocean, Mr. Harper said.
"You have a lot of wealthy consumers living there year round and no critical mass center anywhere close," Mr. Harper said. "I knew it would be a home run if we created the biggest and best mousetrap in this area."
Rouse, which owns 36 retail centers in the U.S., is redeveloping the Carlsbad property, adding more entertainment retailers such as a multiplex cinema that is now open and a streetscape of upscale dining venues. The second phase will include luxury housing, Mr. Harper said.
The Heights at Monmouth, which is about 50 miles south of Manhattan on the Jersey Shore, will include an indoor marketplace called Culinary Heights, with upscale restaurants, shops themed food vendors and wine bars. The site will feature an undulating stairway and curving glass monument at the entryway and walking paths and terraces with water features -- all designed to create a gathering spot.
Kushner and Rouse are still negotiating with tenants to determine which will remain in the property. The mall's tenants now include Macy's and J.C. Penney.
The redeveloped property is expected to open in 2020.
"We need to make the mall evolve to the next iteration," Mr. Morali said. "Then we will be able to truly benefit from the existing community and its demographics and its shopping power."
Write to Keiko Morris at Keiko.Morris@wsj.com
(END) Dow Jones Newswires
May 13, 2017 09:14 ET (13:14 GMT)