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2 Developers in Race for Sole Moreno Valley Mall : Both Compete for Tenants to Build Project

November 23, 1986|DAVID W. MYERS | David W. Myers specializes in the financial aspects of real estate

Two well-heeled developers hoping to build the first huge shopping mall in fast-growing Moreno Valley are racing to sign up tenants, and each company says it won't go through with its own mall if the other firm breaks ground first.

In one corner is Dallas developer Fritz Duda, owner of the Riverside International Raceway, and Homart Construction Co., the construction subsidiary of retail and financial services giant Sears, Roebuck & Co.

In the other corner is a group that includes Edward J. DeBartolo, a pioneer shopping center developer whose personal fortune is believed to be about $650 million.

Each proposed mall is a key part of ambitious projects that are literally right across the street from each other.

Raceway Demolition

The Fritz Duda Co. and Homart want to build a 1.25-million-n square-foot shopping mall as part of Duda's $600-million mixed-use project on 590 acres of land southeast of the intersection of the busy Pomona Freeway and Interstate 215. Part of the project, known as TownGate, calls for the eventual demolition of the raceway.

DeBartolo's company, Ohio-based Edward J. DeBartolo Corp., hopes to build its 1.3-million square-foot mall as a joint-venture with Riverside-based T. & S. Development Inc. The proposed mall is part of T. & S.' $500-million, 400-acre Canyon Springs project just to the west of Duda's development.

The developers were drawn to Moreno Valley--a community of about 70,000, 63 miles east of downtown Los Angeles--primarily because it is one of the nation's fastest-growing, and it still doesn't have a major center. Consumers in the area must currently drive about 13 miles to downtown Riverside if they want to shop at a sprawling mall, so commonplace in areas such as Los Angeles, Orange and San Diego counties.

T. & S. estimates that the market area for its development is growing at a 2.5% annual rate, and demographers expect the number of people in the project's market area to reach 1 million by the end of the year.

Only One Center

But while such rapid growth is impressive, industry leaders feel the market will remain far too small to support two large shopping malls at least for the next several years.

"Only one of these shopping centers are going to get built," sums up John Jay, Duda's vice president. "We'll see (which developer) gets the commitments from the major department stores, and whoever can do that first will do the project. The other will have to devote the property to some other use."

Agrees Richard Lemire, a spokesman for the rival DeBartolo/T. & S. project: "There's only going to be one regional mall built in this area. The market just isn't big enough to support two."

Both sides are confident that their own mall will be the one that eventually is erected. Officials for the companies can rattle off a long list of advantages they feel their center offers over that of their competitors.

Sears as a Magnet

"I think we have the best master-planned development in the area, and I think the accessibility to our regional mall is superior," says Jay at Duda Co. In addition, Sears would likely be a major tenant in Duda's project, and the retailing behemoth could act like a magnet to attract other big tenants.

Jay also notes that his project is actually in the city of Moreno Valley, while the competing project--although it's just across the street--is technically in Riverside.

Lemire agrees that a Sears would help the opposition in its leasing efforts. But he points out that his project is affiliated with JMB/Federated Realty, the parent company of Bullock's and Bloomingdale's. Such stores are also good generators of pedestrian traffic--a key to the success of any regional mall--and their presence could encourage other department stores to take space in the DeBartolo center.

"We also think the fashion stores would go to us because we're in a more affluent area and closer to Riverside," Lemire adds. But, he says, Jay's argument that the Duda project is the only true Moreno Valley mall is hogwash: Day Street is nothing but "political boundaries," Lemire says.

Continue Developments

Regardless of who gets to build the mall, both sides say they'll go through with the rest of their development plans. Duda says ground will be broken next spring on a smaller commercial center providing 460,000 square feet of space.

TownGate will also include another 2 million square feet of office space, a full-service hospital and medical complex, hotel and even a school and recreation facilities by the time it is built out about 15 years from now.

Canyon Springs' nearly 6.1-million square feet of space will include 3.8 million square feet of commercial and retail space and 545,000 square feet for a business park. Like TownGate, Canyon Springs will also have a 450,000-square-foot plaza for tenants, such as theater chains and home-improvement stores.

Getting to build the mall won't be the last battle the two neighboring projects will have to fight. Commercial brokers say the two competitors may be in for an even tougher row when they begin trying to lease their vast amount of planned office space. According to some brokers, the nearby Riverside/San Bernardino office market is already soft and may get worse before it gets better.

Both Jay and Lemire say their firms will wait until the office market firms before they begin construction of most of their office space.

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