Cupertino Square Hires New Leasing Team to Help Save Itself

When Vallco Mall (former name of Cupertino Square) was acquired out of bankruptcy a few years ago, the developers intended on creating an ethnically themed shopping center. After some struggles, the group brought onboard an AMC Theatre, a Lucky Strikes Bowling Alley, and a few other anchor restaurant tenants (Alexander’s Steakhouse, Dynasty Chinese Restaurant) and the mall took a more traditional approach.

The mall went through a partial ownership change less than a year ago when Orbit Resources bought into the project. About a month ago, the mall owner, Cupertino Square LLC, had to seek bankruptcy protection to prevent its lenders, Gramery Capital and United Commercial Bank, from pursuing foreclosure.

Orbit Resources has now brought on GD Commercial out of Milpitas to help it get the mall leased. By bringing on GD Commercial, it seems the owner is again taking the beleaguered mall in the direction of an asian center.

This seems to be the last ditch effort for Cupertino Square under its current ownership, but I remain skeptical of this team to pull it off. What has been lacking from the beginning has been a known and proven mall operator that knows shopping malls from the ground up - from traffic patterns, to tenant selection and placement, to leasing, construction coordination, and management. I suspect that doesn’t quite exist here with the current team.

The real challenge at Cupetino Square is getting tenants to buy into leasing those portions of the mall which are not located near the theatre, which is currently the main draw and where all the tenants want to be. The only way to solve this problem is to bring other anchor tenants onboard, and that is something that will likely prove to be a significant challenge for the owner, lender, and potential tenant to accomplish. Without an anchor, the leasing will have to happen outward from the theatre (tenants are likely not interested in areas of the mall which are unproven), and that is something which might take more time than the current ownership has.

I’ll keep an eye on this, but I have had the chance to speak to a few well known shopping mall investors and operators who have taken a look at the Cupertino Square deal, and the concensus amongst them is that the mall is worth less than the value of the outstanding loans.

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• General Growth on the Chopping Block?
• Serra Center in Milpitas Sells for $43.9M

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