Newport company to acquire Citadel Stores. (Up Front).

Craig Realty Group has entered into an exclusive negotiation agreement to purchase the Citadel Factory Stores and adjoining office buildings from City of Commerce for about $50 million.

The Newport Beach-based firm, which owns factory outlet centers in Cabazon (just outside of Palm Springs) and Carlsbad and helped develop Camarillo Premium Outlets, took over the center's management from Trammell Crow Co. last month and expects to complete the purchase by the end of June. CRG plans to more than double the Citadel's 147,000 square feet of retail space over the next three years.

CRG Managing Partner Steven L. Craig said the firm had expanded its other centers - Cabazon Outlets grew to 550,000 square feet from 90,000 square feet at its 1990 opening - and that expanding Citadel was key to its ongoing success.

"You have to have vitality to build customers," said Craig, who estimated that the expansion costs would run $20 million. "The efforts (at the Citadel) never resulted in growing the center and enhancing the experience."

The center, which includes 255,000 square feet of office space in five buildings, is best known for its fortress-type wall that runs for a third of a mile along the Santa Ana (5) Freeway in Commerce.

The Assyrian-themed site, which was built in 1929 as a factory by Samson Tire and Rubber Co., was redeveloped by Trammell Crow for $118 million. The development includes office and retail space, as well as a 201-room Wyndham Hotel that is not part of the Craig transaction.

It is the trademark wall, with its fortress feel, that has made the center a hard sell to factory outlet buyers, according to David Doupe, executive managing director for Insignia/ESG Inc.'s Capital Advisors Group.

"That project has been such a disaster since the day it opened," said Doupe, who added that freeway access - the nearest off-ramp going south is nearly a mile away - also has been a challenge.

But Craig defended the Citadel's performance, noting that the Citadel's $360 per square foot sales average put it in the "top 30 or 40" centers in the nation. He added that the exterior architectural motifs would be further extended inside the center.

The city acquired the project in October 1983 for $14 million in order to save the structure from the wrecker's ball. City officials did not return calls seeking comment.