This morning, I woke up at 7 AM, with the general plan of traveling from Eureka to the northern terminus of the Lost Coast Trail at the mouth of the Mattole River. The first step was to board a intra-city bus from Historic Downtown Eureka to Bayshore Mall.
Bayshore Mall is a 730,000 SF regional mall, that was built in 1988 along the edge of Humboldt Bay in Eureka. The property was originally developed by General Growth Properties and includes four large anchor spaces, which were originally occupied by J.C. Penney, Mervyn’s, Gottschalks, and Sears. Since then, the property has changed hands to Rouse Properties, an entity that was spun off from General Growth, likely in an attempt by General Growth to separate lower quality properties from higher quality properties. Since 1988, tenants have been continuously leasing spaces and vacating, partially due to the ongoing changes in the nature of the retail industry and partially due to the property’s economic and functional obsolescence.
The mall was especially hard hit during 2008-2009, when in the span of a short time many tenants vacated including Mervyn’s, The Movie, Borders, Gottschalks, and probably many more smaller tenants. Since then, the property has pivoted from a regional mall to more of a lifestyle center/community center/strip center. In the past couple of years, the mall has vastly improved its occupancy with new tenants including TJ Maxx, Ross, Ulta Beauty, Planet Fitness, and Wal-Mart. Along with these new tenants, the mall has created many new entrances from the exterior of the building directly into stores such as TJ Maxx, Ross, Wal-Mart, Sports Authority, Ulta, Planet Fitness, etc. Although these stores still have entrances from the interior of the mall, the exterior entrances greatly reduce the traffic to the interior common areas of the mall. It’s almost as if the owners of the mall consciously decided that in order for the entire mall to survive over the long term, they would need to amputate one of their limbs in order to survive and be healthy. In the case of Bayshore mall, the owners basically amputated the interior/back portion of the mall, hoping that the front-facing spaces with exterior entrances would maintain high occupancy levels, thereby stopping the mall’s decline.
As of now, the interior of the mall is very bland and generic. Most of the tenants sell off-price new clothing, beauty supply items, cell phones, and other service-oriented businesses that would commonly be located in neighborhood shopping centers and strip centers. When I stopped by the management office and spoke to the operations manager, he explained that they recently invested $1,000,000 on changing the flooring throughout the mall. Although this was probably a good decision, the interior of the mall needs much more than new flooring. If the management doesn’t decide on a definite, clear direction and implement major changes, the interior portion of this mall will continue to its decline. Eventually, the mall will become an low-to-average sales generating, low-rent, high-expense, high-maintenance property which will not contribute much incremental income (and thereby market value) to the overall mall financials. One potential strategy or “major change” could be to create a more entertainment-oriented mall by investing a lot of money into the common areas and courting entertainment/hospitality-oriented tenants, which would likely increase mall traffic, increase the mall’s attainable rents, and increase the occupancy rate.
This mall has a very difficult road ahead. With tenants like Staples, Sports Authority, Party City, Sears and Petco,, there is a very high likelihood that the mall will continue to see downsizing, vacancies, and relocations over the next decade or two. Each of these potential future vacancies will provide challenges to the remaining tenants at the mall and to the property’s management/leasing team. Additionally, Wal-Mart may also not be a long-term tenant. In 2011, Wal-Mart discretely acquired their 73,000 SF building from Gottschalks through a bankruptcy sale. Many people speculate that this location is just being used as a temporary location, through which Wal-Mart can gain a foothold in Eureka, until it can win over public sentiment which would eventually enable Wal-Mart to build one of their prototype 200,000 SF supercenters. If Wal-Mart vacates their anchor space, Bayshore Mall would suffer another setback and have another difficult vacancy to fill.
All in all, I’m not too optimistic about the future of this mall. It’s debatable whether it should still even be considered a mall. It’s definitely not as much of a “mall” as it was 10 or 15 years ago. With no movie theater, bland common areas, its tenant mix, and about 10-15 stores having exterior entries directly from the parking lot, this is more of a soft-goods shopping center than a mall. Some mall-type remnants can still be seen (food court and interior common areas), but the blood flow (traffic) has already been cut off from those limbs (portions of the mall) and it’s only a matter of time before the interior of the mall becomes uneconomical to maintain operational. At that point, this property will be an indefinitely-underperforming property with tons of wasted potential
- Where do I see room for improvement in the mall? What changes would I make?
- Property needs to have more traffic drivers. Some ideas are fast food/fast casual restaurant pads along the main road to bring traffic into the parking lot, more entertainment businesses (restaurants, Chuck E Cheese, arcades, hip bowling alley, Buffalo Wild Wings, Dave and Busters, etc.) This mall won’t be successful unless there’s some sort of excitement/life, which currently isn’t there. This entertainment aspect would be especially useful in the interior portion of the mall
- Take advantage of the bay front location: Walking path along the bayfront (maybe from Historic Downtown all the way to Bayshore Mall), picnic tables along the bayfront, and movies on the bayfront, etc.
- Density/Walkability: Over the long-term, coordinate with the city and pressure the city to locate libraries, city offices, hotels, universities, senior centers, high density residential, and other uses near or inside the mall. This mall needs to be forced into people’s lives and made to be extremely convenient. Otherwise, people will be able to go about their lives without visiting the mall
- Develop a definite strategy for the interior of the mall: Entertainment, Entertainment, Entertainment
- Increased signage along Broadway: As of now, the property only has one small-paneled sign along Highway 101. That is definitely not enough for this type of a property. They should try to install multiple billboards and/or large pylon signs for all of the tenants
- New Landscaping and minor cosmetic renovation (paint, decorative interior trees/flowers, furniture)
- Potentially explore a joint venture/partnership/agreement with the City to receive tax breaks or subsidies in exchange for making a huge renovation which would not be economical otherwise. This property is very central and important for the City and it’s probably important for the City that this property performs well and remains presentable.
Lessons:
- It’s very difficult to predict how a property type, market, or specific property will perform over the long run. In this case, even the sophisticated General Growth Properties/Rouse was left holding a disaster property during the recession. They would have been much better off if they sold the property 10-15 years ago when it was stabilized. Likewise, I shouldn’t try to predict market trends or market fluctuations. Just focus on “buying, fixing, and selling.”
- Properties requiring high levels of capital expenditures can be very unattractive. Rouse Properties has undoubtedly spent tens of millions of dollars on renovations, leasing commissions, and tenant improvement costs over the last few years, and it still has a long way to go. Due to the nature of the property and the changes occurring in the retail industry, these high capital expenditures will likely continue to be necessary well into the future. These high expenditures have high opportunity costs, considering the returns that could be achieved by investing in other real estate. Rouse Properties is a professional, sophisticated landlord and I’m sure they know the steps that could be taken if they had unlimited money to spend on Bayshore Mall. Maybe it just doesn’t make sense for them to invest a lot of money into this property. It’s easy for me to criticize them as a one-time visitor of the mall, but it’s not an easy situation for any property owner to be in.
From Bay Shore Mall, I boarded the 8:30 AM bus to College of the Redwoods. College of the Redwoods is 2-year community college located at the Southern edge of Eureka about five miles south of Bay Shore Mall. From there, I transferred to another bus which dropped me off at the remote, historical Fernbridge. Fernbridge was constructed in 1910, and is the largest, functional, concrete-poured bridge in the world. The bridge spans about a quarter of a mile across the Eel River and the road on the other side continues on to Ferndale.
After taking a break at the cafe, I walked across Fernbridge and continued south on the road for about four miles across numerous bridges and past many farms until reaching Ferndale. Ferndale is a small, historic town, featuring well-preserved Victorian-architecture buildings built as early as the mid 1800s. Ferndale was originally founded and settled as a dairy/farm town, but has since become primarily a tourist-oriented town which draws visitors through its architectural charm and quaint, historical downtown area.
The first stopping point in Ferndale was the public library, a historical one-story building with an interior that looks pretty much like any small-town library in the country. On the wall behind the librarian’s desk there is a beautiful wooden carving named “Winter on the Eel,” by Gerard Krimmer. The librarian mentioned that the sculpture was carved out of a single piece of wood, and has been on the wall of the library from before she began working at the library fifteen years ago.
I continued walking through Downtown along Main Street, stopping to have a veggie burger, fries, and ice cream at a tourist-oriented restaurant. Also, along Main Street, there was a local real estate office where I stopped in to chat with one of the agents there. More specifically, I asked for information (average sale price PSF, average market rent, any properties available for sale) regarding the commercial buildings in the Downtown area. The lady mentioned that properties are usually owned by local families/owner-users are rarely come up for sale. The last building to be sold is being fully gutted and renovated as an antique mall. Also, she mentioned that Ferndale is a seasonal town that is mostly busy during the summer months. She suggested that I should research Fortuna as an area which may have a larger supply of high pedestrian-traffic, tourist-oriented properties.
Near the end of Main Street, there was a sign reading “Petrolia” pointing right toward a lightly trafficked street. A couple hundred feet down the lightly-trafficked street, an immediate left turn will take you up the lightly traveled, paved road toward Capetown and Petrolia. Simultaneously with me arriving at the beginning of a road, a lady in a pickup truck was turning left onto the road and en route to Capetown. She offered me to hop into the bed of her pickup truck where her blue-heeler dog, Girdy, was also sitting. I hopped in and she drove quickly on the windy, steep road as the terrain alternated between green, hilly pastures and occasional spotted portions of densely forested areas. During the drive, there were beautiful, panoramic views of the ocean and vast, hilly pastures. After about thirty minutes, the truck descended into Capetown through a series of switchbacks. In Capetown, she pulled the truck over to let me out near the Bear River. Capetown is the westernmost point in California and is more of a geographic location than a town. There are probably ten homes within a mile of Capetown. Before parting ways, she showed me Girdy’s daughter, a 2-month old Blue-Heeler puppy, in the back seat of the truck. The puppy was adorable and playful.
Here are some brief notes/observations I jotted down while waiting in Capetown:
“The sound is filled with dozens of birds simultaneously chirping. The sounds are like the equivalent of a “Big Sur View” for my ears. One of the main problems with land on busy highways is the traffic, loud noise, and lack of privacy. The remoteness of Petrolia is similar to the privacy one would experience on a desolate ranch road in Iowa or Nebraska. It’s a special and unique experience, especially for the heavily trafficked and populated California Coast.
I waited on the bridge above the Bear River for about forty-five minutes, eagerly awaiting the occasional car that passed every 10-15 minutes. The third or fourth car that passed over the bridge stopped and offered me a ride to Petrolia. The driver, Dana, had a very friendly and calm, yet enthusiastic personality. He mentioned that agricultural and residential property has skyrocketed in value over the past few years and rarely comes up for sale. Dana owns an 86-acre ranch near Petrolia, which he acquired in 2011 through a rare Government-seizure sale. At the time, his real estate broker/friend called him and told him that he had one hour to write an offer on the ranch if he was interested. Yes, it’s supposedly that competitive! Part of the reason for the skyrocketing prices, is that landowners in Humboldt County are allowed to have 99 cannabis plants on their land. Almost everyone takes advantage of this lucrative opportunity, something that I noticed with many of the people I met in rural Humboldt County. He mentioned that he had numerous farms where he grows cannabis, and on that day there were about 100 pounds of Marijuana in his truck bed. It all made sense considering the subtle scent of cannabis I smelled upon entering the car. As he opened the sunroof, the smell of cannabis flooded the car for a few seconds. He mentioned that he tries to ensure that the cannabis he grows is only used for medicinal purposes, but obviously he knows that much of it isn’t. He says that there is high demand for good quality cannabis and that his cannabis is some of the best quality available. Considering that there are 28 grams in an ounce and 16 ounces in a pound, the wholesale value of 100 pounds at $3/gram would be $134,400.
Dana mentioned that he first started looking into Marijuana when his son was prescribed prescription painkillers for pain in his leg. Seeking alternative, long-term solutions, Dana’s doctor suggested he look into marijuana as an alternative method of relieving the pain. Marijuana has worked wonders for his son and allows his son to lead a better quality life than he otherwise would be able to. As we discussed in more detail, Dana shared that neither he nor any of his children smoke marijuana or use any drugs. We shared a lot of the same views on drugs, family, and other issues facing society. He was a very interesting person, and I was asking as many questions as I could to try and pinpoint the philosophy/mindset/keys to his seemingly effortless positive attitude and enthusiasm. As we approached the Petrolia General Store, our conversation was still in full swing, and I was sort of disappointed that the conversation was ending, but he shared his email and I might decide to contact him in the future.
After picking up a tide map from the general store, I walked through Petrolia, crossed the Mattole River, and continued on the six miles of remaining dirt road until the mouth of the Mattole River. About a mile into the walk, as an occasional car approached, I stuck out my thumb and a couple in a beaten down car offered to give me a ride a mile down the road. They mentioned that they were (cannabis) “trimmers” on a nearby farm and were headed to work. Here is a link to a 2011 LA Times newspaper article about people employed as cannabis trimmers.
They ended up driving me the entire five miles to the trailhead, which I really appreciated. I noticed their gas tank was near empty and offered to chip in $10 for gas, which they accepted and really appreciated.
When I arrived at the Trailhead, I walked the opposite direction of the Lost Coast Trail, walking through the Mattole campground until reaching the mouth of the Mattole River. At least during the time of day that I was there, the Mattole River wasn’t meeting the ocean, but was separated by a porous, rocky barrier, through which water was probably somehow escaping through to the ocean.
I then backtracked, walking south on the beach toward the trailhead. The campground was quiet and remote with a unique, adventurous crowd. At one of the campsites, there was an interesting school bus, which had been painted blue and converted into an RV. It was not unexpected considering everything I’ve come across so far in that area of Humboldt County, and looks like it would be a pretty awesome adventure-mobile.
At around 5:30 PM, I filled out the permit and began hiking the Lost Coast Trail. The first few miles of the trail hugged the shoreline. The shoreline alternated between loosely packed sand, densely packed sand, hard packed small rocks, loose gravel, and about two-inch wide loose pebbles. As I walked across the beach, I scanned the shoreline for attractive rocks and shells.
A couple of miles into the trail, I came across a group of a few dozen sea lions lounging on the shoreline. As I approached them, all except two hurriedly flopped into the ocean where I noticed an even larger group of sea lions looking in my direction with only their heads outside the water.
By this point in the hike, I had already eaten several Lara Bars. Yesterday, in Eureka, I purchased 44 Lara Bars, in over ten different flavors including Apple Pie, Chocolate Chip Brownie, Banana Bread, Coconut Chocolate Chip, and Peanut Butter Cookie. What makes these bars so great is their simple ingredients. For example, here are ENTIRE set of ingredients for a few of their flavors:
- Peanut Butter Cookie:
- Dates, Peanuts, Sea Salt
- Carrot Cake:
- Dates, Almonds, Walnuts, Raisins, Dried Pineapple, Unsweetened coconut, carrots, cinnamon, extra virgin coconut oil
- Coconut Chocolate Chip:
- Dates, Semi-sweet chocolate chips, unsweetened coconut, cashews, almonds
Not only do these bars taste great, they’re also made of simple ingredients so there’s really no need to worry about ingesting chemicals and unhealthy ingredients contained in other protein and energy bars.
About six miles into hiking the Lost Coast Trail, already having passed many streams and notable sites, I set up camp on a ridge overlooking Sea Lion Gulch. The site was a minute’s walk from a stream and overlooked the coast from about 100 feet above sea level. What a day and beginning of the Lost Coast Trail!
