Five Lagunas can’t catch a break.

A year after the Lake Forest-based developer Merlone Geier Partners bought the Laguna Hills mall for $110 million, longtime anchor Sears closed, vacancy rates skyrocketed to 32 percent and a leading analyst firm gave the center a B-minus rating.

To right the ship, Merlone Geier broke ground in 2016 on a massive $260 million makeover for the mall, rebranding it Five Lagunas. The fix-it plan called for a pedestrian-friendly urban village with chef-driven dining, new store facades, a redesigned mall interior, a 14-screen luxury cinema, a fitness center, apartments and a park.

Luxury apartments, a movie theater, park and indoor and outdoor shops are all part of a plan unanimously approved Tuesday to revitalize the tired Laguna Hills Mall, creating Five Lagunas.

Construction workers work on the expansion and renovation project at Five Lagunas Mall, formerly Laguna Hills Mall, in Laguna Hills on Wednesday, July 19, 2017. The renovation will include luxury apartments, a movie theater, a park and indoor and outdoor shops. (Photo by Leonard Ortiz, Orange County Register/SCNG)

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Five Lagunas is the development under construction at the Laguna Hills Mall. (Nancy Luna, Orange County Register)

Luxury apartments, a movie theater, park and indoor and outdoor shops are all part of a plan unanimously approved Tuesday to revitalize the tired Laguna Hills Mall, creating Five Lagunas.

The newly remodeled Ruby’s Diner is part of the renovation project at Five Lagunas Mall, formerly Laguna Hills Mall, in Laguna Hills on Wednesday, July 19, 2017. The renovation will include luxury apartments, a movie theater, a park and indoor and outdoor shops. (Photo by Leonard Ortiz, Orange County Register/SCNG)



Construction workers guide a truck at the expansion and renovation project at Five Lagunas Mall, formerly Laguna Hills Mall, in Laguna Hills on Wednesday, July 19, 2017. The renovation will include luxury apartments, a movie theater, a park and indoor and outdoor shops. (Photo by Leonard Ortiz, Orange County Register/SCNG)

Steel beams to be used for the new movie theater as part of the the expansion and renovation project at Five Lagunas Mall, formerly Laguna Hills Mall, are piled up in the parking lot until ready to use in Laguna Hills on Wednesday, July 19, 2017. The renovation will include luxury apartments, a movie theater, a park and indoor and outdoor shops. (Photo by Leonard Ortiz, Orange County Register/SCNG)

Temporary signs the that anchor stores, Macy’s and JCPenny, remind visitors the stores are open during the construction on the expansion and renovation project at Five Lagunas Mall, formerly Laguna Hills Mall, in Laguna Hills on Wednesday, July 19, 2017. The renovation will include luxury apartments, a movie theater, a park and indoor and outdoor shops. (Photo by Leonard Ortiz, Orange County Register/SCNG)

Five Lagunas, the redevelopment of the present Laguna Hills mall seen in an artist’s rendering, will have a modern, trendy look with new flooring, wall treatments and landscaping.

Luxury apartments, a movie theater, park and indoor and outdoor shops are all part of a plan unanimously approved Tuesday to revitalize the tired Laguna Hills Mall, creating Five Lagunas.



Luxury apartments, a movie theater, park and indoor and outdoor shops are all part of a plan unanimously approved Tuesday to revitalize the tired Laguna Hills Mall, creating Five Lagunas.

Luxury apartments, a movie theater, park and indoor and outdoor shops are all part of a plan unanimously approved Tuesday to revitalize the tired Laguna Hills Mall, creating Five Lagunas.

But on Friday the developer was forced it to rethink the vision for the 68-acre parcel. Macy’s, a longtime anchor, will shutter in early 2018.

“We’re just evaluating all of our options,” said Stephen Logan, vice president of development for mall owner Merlone Geier Partners.

Rethinking the mix

The swankier Five Lagunas was set to debut in the summer of 2018. Now, it’s unclear when the upgrades will be complete.

Logan said the urban village, food-driven concept is still in play. However, with the Macy’s space up for grabs, he said the site is being reevaluated to “address recent trends that we are seeing take place in the market as consumer interests and demands are changing.”

The mall will continue to operate, and Macy’s will remain open through the holidays.

Macy’s said it opted to close after “reviewing its real estate portfolio across the country to see if there are opportunities to improve the use of our assets.”

“The decision to close stores is always a difficult one, but Macy’s is delighted to have served this community over the years,” the retailer said.

Regular and non-seasonal employees were told of the closure Aug. 30. Employees who can’t be placed in new positions will be eligible for severance, including outplacement resources, Macy’s said.

While losing a key anchor might be considered a major setback for the mall, Logan called it an opportunity.

With the firm now controlling all of the mall’s real estate, it wants to ensure each piece falls into the right place when it comes to placing new tenants.

“We still believe in a luxury movie theater. We still believe in a health club and open space,” he said. “We’re very excited.”

Plans for 1,000 luxury apartments are still on the table. But once again, how those plans flesh out are now on hold.

Reshaping the mall

In a 2017 “Mall Outlook” report, Green Street Advisors of Newport Beach said apparel was once a category thought to be immune to e-commerce. Now, it’s “one of the fastest growing online businesses over the past few years and the pace of growth is expected to continue.”

To be successful, malls battling e-commerce headwinds must introduce “Internet-resistant” concepts such as restaurants, entertainment and services , said DJ Busch, a managing director at Green Street.

Logan said Merlone Geier does not know when its new plans will be revealed. He didn’t indicate what changes might be made, only stating the developer is considering adding commercial office space.

“We believe that it’s going to be an entertainment, restaurant-based atmosphere with a state-of-the-art health club and a place for people to go and have a date night in the park,” he said.

No new retailers have been announced with the exception of the luxury theater Showplace ICON. Logan said Nordstrom Rack has extended its lease. He said the developer is close to making other lease announcements for the mall which is home to JCPenney, King’s Fish House and California Pizza Kitchen.

“Tons of restaurants and retailers really want to be there,” said Logan, who’s been with the company since early 2016.

Merlone Geier bought the mall in 2013 for $110 million from longtime owner Simon Property Group. It is the company’s largest property in California. At the time, sales tax revenue for the mall had reached a seven-year low of $1.4 million in 2013, down from $1.8 million in 2005, according to city records.

In 2014, the developer, which also owns several supermarket-anchored shopping centers throughout Southern California, took over the Sears lease. The retailer closed that same year.

Laguna Hills Mall was built in 1973 as part of the build-out of the inland South County cities, but in recent years it has grown tired. There have been only minor upgrades, which have left the mall with high vacancy rates.

The mall also suffers because it’s sandwiched between two snazzier retail centers with premium tenants — The Shops at Mission Viejo and Irvine Spectrum Center.

Losing Macy’s is part of a larger trend playing out at traditional malls, which are seeing department store anchors shutter as a new generation of shoppers turn to the Internet for goods and services.

That’s forced developers to be creative.

In Irvine, the Macy’s at the Irvine Spectrum Center closed. The Irvine Company demolished the space to make room for a string of smaller tenants.

In 2016, MainPlace mall in Santa Ana replaced a Macy’s Men’s and Home store with a 24-Hour Fitness Super Sport, Lucille’s, Panini Café, Ashley Furniture and Round One Bowling & Amusement.

TIMELINE: LAGUNA HILLS

1973: Laguna Hills Mall is built at El Toro Road and Avenida de la Carlota

1990s: The mall is owned by the O’Connor Group.

1994: Minor updates are made to the property.

1997: Simon Property Group acquires the property.

2013: Merlone Geier Partners buys Laguna Hills Mall property for $110 million, according to CoStar.

2014: New mall owners rename the property “Five Lagunas”

2013-2015: Merlone Geier Partners engages city of Laguna Hills, local residents and business owners in

discussions to create a destination most beneficial to community needs.

2015: Mall owner releases artist renderings of Five Lagunas.

2016: Mall owner complete master plan for Five Lagunas to city.

Register staff writer Jeff Collins contributed to this report.