What's the Deal | Tyler Mateen & TTM Real Estate | HHLA Entertainment Center

Deal Info:

• ➡️ Address: 6081 Center Drive located in Los Angeles, CA
• ➡️ Acquisition Date: 03/26/23
• ➡️ Acquisition Price: $80,000,000
• ➡️ Square Footage: 249,000 sqft
• ➡️ Asset Type: Retail
• ➡️ Parking: 2,000 spaces
• ➡️ Notable Tenants: Cinemark, Dave and Busters, 60out Escape Room, the Muhammed Ali Experience, Buffalo Wild Wings 

What drew you to buy HHLA?

Back in 2015 I started buying shopping centers in Las Vegas. I liked the yield compared to multifamily investments and the limited development of shopping centers in recent years helped the economics of the product type. If the location of your shopping centers are irreplaceable it has monopolistic features and makes it much less likely to go bankrupt. After I bought some shopping centers I expanded my focus to other forms of retail and came across this one of a kind property in Los Angeles.

HHLA has some extremely unique qualities that set it apart from comparable retail properties. It has 2,000 parking spaces, great signage visibility off of the freeway, strong building integrity, and high ceilings throughout. It was home to one of the largest movie theaters in California which served as the property’s anchor tenant. This movie theater was generating roughly 65% of the properties revenue so I saw an opportunity to bifurcate the space and bring in another tenant. I have plenty of ideas for the new space which should attract a lot more people to the site and reshape the future of the center. 

What are some of the strategies you will use to increase the property value?

Like I mentioned earlier, splitting the risk from one anchor tenant to two anchor tenants will diversify income for the asset split up tenancy risk. The movie theater will hopefully go from 65% of the overall income to 8-10% which completely reshapes the risk profile of the deal. The income will rise as we sign new leases- and the new tenant in the bifurcated space will attract more visitors 
which will bring parking income up. I think people will start to realize that the future of the center is very promising and we can ask for a premium on rent for currently vacant spaces. Along with some other management and design improvements, this influx of new visitors will be sure to increase the value of HHLA.

What were unexpected challenges that you encountered with the deal?

This deal has been a challenge from the very beginning. During our due diligence we sought to understand the complete picture and the overall risk of the asset, which was a challenging task. We had to ask many questions and look from many angles to determine what makes the most sense for this space. Bifurcating a 150,000 sqft movie theater has been extremely challenging especially since they are continuing to operate in the space. The construction is complicated and we deal with a multitude of issues such as where an elevator shaft should go to create the least amount of obstruction but also work for the new tenants who will be loading and unloading huge art installations in the space. Since there will be 6,000-7,000 people in the space at a time there are new HVAC requirements and structural capacity. Installing the HVAC units onto the roof of the building is also tricky since we are right next to a freeway, so we are considering using helicopters to make it work. With the new tenant we’ve signed we have to increase electrical power and working with utilities companies can be a slow and arduous process. 

What are your long term plans for the property?

I’ve generally stuck to the strategy of long term holding and I’ll use that strategy for HHLA as well. Los Angeles is a strong city historically speaking and while it may not be growing as fast as other cities throughout the country, I’m confident that it still has room to expand. LA already has 50 million tourists annually, making it the second most visited city in the country and is one of the strongest markets in the US. If the right price comes along I would consider selling but I know that this building has a very prosperous future ahead of it and I’m solving issues that are scalable. I want to take the lessons I’ve learned with HHLA and apply them to similar properties that have the potential to become entertainment hubs in prime locations. I’m extremely bullish on retail in the US and I think entertainment retail is more complex than people realize, so where there’s complexity there’s opportunity. With this strategy I can continue to create value in underutilized sites and hold these assets long term.

What advice would you give a CRE pro starting in the industry?

Make sure to really do your homework on sites and subsequently create your thesis with conviction. Once you have your thesis you need to go full throttle and truly believe in what you’re doing. Hopefully you’ll have done your homework correctly and will be proven right. Real estate and entrepreneurship is a 24 hour thing, it is not like a normal 9-5 job. You have to expect that situations will blow up and you’ll have to sharply adjust your focus for that day on solving the new problems that arise. If you want to achieve big goals and solve large problems you’ll be rewarded accordingly, but you’re just going to have to cultivate the mindset to make it happen.

Traded Student Ambassador Program

This interview was conducted through Traded's Student Ambassador Program in collaboration with Thomas DeRuvo of Rutgers University. 

Thomas DeRuvo's LinkedIn