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An artist's rendering shows what Laurel Mall will look like when the new owners are finished fixing it up. Somera Capital Management and AEW Capital Management bought the mall for $31 million. (Laurel Mall)
An artist's rendering shows what Laurel Mall will look like when the new owners are finished fixing it up. Somera Capital Management and AEW Capital Management bought the mall for $31 million. (Laurel Mall)
Commercial Real Estate Report

'Mall Repair' in Laurel

Laurel Mall opened in 1978, at the height of popularity for enclosed shopping centers. Times have changed.
Laurel Mall opened in 1978, at the height of popularity for enclosed shopping centers. Times have changed. (Photos By Lois Raimondo -- The Washington Post)

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By Ylan Q. Mui
Washington Post Staff Writer
Monday, March 5, 2007

The halls of Laurel Mall are lined with vacant storefronts. Some are empty shells; others are masked by new drywall and paint. Even the food court was deserted on a recent afternoon. And the enormous parking garage that sits on Route 1 and is supposed to serve as the mall's grand entrance is almost never full, a testament to decades of neglect and the fickleness of retailers.

Thomas P. Falatko looked at the property and asked the tough question: Should Laurel Mall even exist?

Across the country, many regional malls are languishing as shoppers are drawn by the gravitational force of super-regional mega-malls outfitted with restaurants, spas, movie theaters, gyms, supermarkets and, oh yes, stores. Or else they're ambling down the brick-lined streets of an outdoor "lifestyle center" that mimics the feel of a town square, with condominiums and office buildings nearby. The regional mall -- enclosed shopping centers between 400,000 to 800,000 square feet that proliferated through the 1970s and 1980s -- is becoming a relic of the past.

But Falatko, senior vice president of private-equity firm Somera Capital Management, has made a business out of turning around shopping centers like Laurel Mall. He calls his firm "a mall repair shop." With partner AEW Capital Management, the company is betting tens of millions of dollars that it can bring back Laurel Mall.

There are elaborate plans for a new brick facade, a first-run movie theater, higher-end national retail tenants, a new parking garage, a pretty water fountain. Think of it as Extreme Makeover: Mall Edition. It's the biggest investment in one shopping center that Somera has ever made.

"It's buying the worst house on the best block," Falatko said. "This is what you dream about."

Grand Beginning

Laurel Mall started off as two shopping centers. Laurel Shopping Center housed Giant Food and former local retail icons Hecht's and Peoples Drug. A Montgomery Ward department store was about a block away. In 1977, New York developer Shopco came up with a $30 million plan to connect the two buildings with an indoor mall and a new anchor tenant, J.C. Penney. The plans called for nearly 1 million square feet of retail space, making it bigger than the nearby White Flint, Columbia and Landover malls.

The current Laurel mayor, Craig A. Moe, was at the grand opening in 1979 as a spectator and later did a brief stint as a security guard. He recalled the awe over the eight boutique stores in the middle of the mall that sat on a carousel that rotated once every 40 minutes.

Malls, which emerged in the 1950s with two stories of shopping anchored by department stores, were in their heyday when Laurel opened. Most of the 20 shopping centers in the Washington area built in the 1970s and '80s with more than 400,000 square feet of leasable space were enclosed malls, including White Flint and Springfield Mall. Mazza Gallerie in the District was built in 1975 but is just under 300,000 square feet. Tysons Corner Center is the region's largest mall, with more than 2 million square feet, and was built in 1968.

But tastes changed. Enclosed malls gave way to open-air shopping centers that mix retailers, restaurants, residences and offices in one place. Only three shopping centers built in the Washington region since 1990 are enclosed.

Over the years, retailers left Laurel for Columbia Mall or White Flint. In 2001 Montgomery Ward went out of business and closed its Laurel store. A year later, JCPenney shut down. Then Sam Goody went dark, followed by Express and Structure and electronics retailer Babbage's in 2004. Even McDonald's closed.

As more stores left, fewer people shopped. And as traffic declined, stores kept closing. Laurel Mall's financial problems put it in court-appointed receivership two years ago.


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© 2007 The Washington Post Company

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