As Some Malls Fail Others Thrive

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While once-vibrant shopping centers fall into disrepair and neglect, others benefit from deep-pocketed investors, local leadership.

When Woodville Mall opened in 1969 in Northwood, Ohio, near Toledo, it was the first in its region to be enclosed and air-conditioned, and it boasted three anchor department stores: J.C. Penney, LaSalle’s and Sears.

Now it’s a target of vandals and an eyesore plagued with a leaky roof, mold and asbestos contamination. Only Sears remains open.

For years, local government officials had called Woodville a “public nuisance” and pressed its owners to fix it up or tear it down. Last month, a judge ordered the mall’s former owner, Mehran Kohansieh, and current owner, Soleyman Ghalchi, to pay for its demolition.

“If you have an owner who is getting what he can out of it without investing to keep it viable, this will invariably happen,” said Bob Anderson, Northwood city administrator.

Once-thriving malls slipping out of fashion with consumers and into disrepair dot the landscape. In Illinois, the dead or dying malls include the shuttered South Side Evergreen Plaza Shopping Center and the Lincoln Mall in Matteson, also owned by Kohansieh, which needs about $1 million in repairs just to bring it up to code.

Adam Cody, vice president of Jones Lang LaSalle Retail, contends that, in the Chicago area, there are more thriving malls, backed by deep-pocketed owners, than those on the decline.

“Landlords have gotten creative and have their money behind them keeping them relevant,” he said.

Popular retailers such as Apple and H&M and upscale cosmetics superstore Sephora are breathing new life into malls, said Neil Stern, senior partner at McMillanDoolittle, a Chicago-based retail consultancy. “Well-positioned existing malls are doing extremely well post-recession,” he said.

But just as malls helped undermine Main Street merchants from the 1960s through the 1990s, in recent years malls have faced headwinds: consumers opting to shop online, for example, and big-box retailers such as Target and Kohl’s luring spenders away from traditional department stores that anchor malls.

The economy also has sped up the downward slide of some malls, especially those in areas where surrounding communities have been hit hard by declining incomes. Others have been allowed to get old and tired, their owners failing to invest in them and keep them up.

In the case of Woodville Mall, Anderson said he’s worried that the only way it will be razed and redeveloped is if the town shoulders the costs, a hefty outlay for a town of only 5,400 people.

“The problem comes when the vacant land value is not anywhere near the cost of tearing down the mall,” Anderson said.

Still, some malls have managed comebacks.

Randhurst Shopping Center in Mount Prospect, which billed itself as the largest mall in the world when it was built in 1962, relaunched itself in 2011 as Randhurst Village. Now it’s a roughly $200 million open-air “lifestyle center” featuring restaurants, a movie theater and a Hampton Inn & Suites.

In a sense, Randhurst had fallen victim to the successes malls enjoyed. As more upscale shopping centers sprouted nearby, such as Deer Park Town Center in Deer Park and Woodfield Mall in Schaumburg, shoppers steadily began bypassing Randhurst, Mount Prospect village officials said.

It didn’t help that Randhurst’s anchor department stores began imploding: In the late 1980s, anchor Weiboldt’s closed, and by late 2000, so did its parent, Montgomery Ward & Co. Carson’s is the only traditional department store left standing at the mall.

Through the years, the mall withered into a “teenage hangout and place where senior citizens went walking,” recalled Mount Prospect Mayor Arlene Juracek. And that’s what triggered village leaders to take action.

“Village management understood that this (the mall) was a huge source of sales tax revenue,” Juracek said. “It was our showpiece, our claim to fame for so long, and to have it vacant would’ve been a very bad thing.”

In the early 2000s, local officials traveled to retail conferences and introduced themselves to developers, hoping to pique their interest in the village’s attractive demographics, which includes an average income of $66,000, according to its website, and a population of more than 325,000 within a 5-mile radius.

In 2006 the mall’s owner, JP Morgan Asset Management, brought in a developer, Sarasota, Fla.-based Casto, to “de-mall” Randhurst and transform it into an outdoor village where consumers could enjoy entertainment and food options in addition to shop at stores they liked.

To spur redevelopment. Mount Prospect officials created a business improvement district and agreed to provide up to $25 million in incentives funded by various new taxes, including a 25-cent movie tax and a hotel tax. Town officials also agreed to share a portion of the mall’s sales tax revenue with Casto if the new owners boosted the amount of sales tax generated.

Updating included adding big-box stores and more moderately priced shopping alternatives such as Sports Authority, Old Navy and Carter’s, as well as restaurants such as E+O Food and Drink.

Fitting with the “lifestyle” component, consumers could drive up to the stores, park, and get in and out quickly. Or they could stroll the “main street” to shop, grab something to eat or catch a movie.

On average, malls take in about $454 per square foot, according to figures from the International Council of Shopping Centers, up nearly 15 percent from 2010. Randhurst officials declined to disclose how much revenue the rejuvenated mall is generating per square foot.

They would say that Randhurst, while 88 percent occupied, is trying to bring in more apparel stores. Those niches have been slow to rebound in the aftermath of the recession, according to John Hutchens, Casto’s vice president of project management.

The rebirth of Randhurst illustrates how important local government involvement is in keeping malls looking fresh and vibrant.

The city has to be in a leadership position along with the private sector, said Maureen McAvey, a retail expert at the Urban Land Institute in Washington. “They have to be prepared to really think through what the future of the community is going to be.”

In Mount Prospect, Hutchens said the Randhurst Village project worked because “we aligned our goals with the village of Mount Prospect because they see (the revitalization) as a positive as well … and you work in that spirit of cooperation.”

In contrast, there’s Lincoln Mall in south suburban Matteson.

McAvey said a key ingredient to turning it around is having an “enlightened owner with deep pockets in addition to an enlightened community. It won’t limp along,” she said. “That’s unsustainable.”

She predicts that, ultimately, new owners will have to be brought in to upgrade or rehab the mall.

“There’s a good market here — there’s nothing wrong with the market. It’s really an issue of investment,” said Bridget Lane, director at consultancy Business Districts Inc., who worked on the Randhurst redevelopment and co-authored a 2012 federally funded market study of south suburban retail.

Lane said Matteson’s demographics, a key metric for interested developers, are comparable to those in Mount Prospect, where Randhurst is located. Within a 15-mile radius of Lincoln Mall, the average household income is more than $73,000 and the population is more than 245,000, according to Lane’s study.

But first, there’s the challenge of the current ownership.

“The community is up against an owner, who … is leasing based on a low-cost operation. And unfortunately, a big shopping district is not a low-cost operation,” Lane said.

Town leaders in Matteson filed suit against Kohansieh, seeking to force him to fix up the property, which they claim is dangerous. He purchased the mall at a tax auction in 2012 for $150,000 and assumed $9 million in accumulated fines and unpaid taxes.

Last month, a court-appointed receiver was approved to manage and oversee repairs and pay bills. But the fund the receiver has to work with totals only $100,000. Redeveloping the mall could cost as much as $200 million, according to retail experts.

“The mall was already in a big mess,” Kohansieh, 48, said Friday. “Violations were there before I took over that mall.”

He said the mall was losing $2 million a year. “I had to deal with that problem, and the problem with the city,” he said. “How much could one person do in that short period of time?”

He said that after he bought it, he hired an architect and since then has been “going back and forth” with the city. At least once, the city has rejected his plan, the Tribune has reported. Kohansieh also said a city staffing change made communications more difficult.

“I’m asking for the city to take it easy on me,” he said. “I’m sorry if I created a hurdle to the city, but it wasn’t intentional, and I’m more than willing to create a friendly environment.”

Westfield Old Orchard Mall in Skokie is cited by industry watchers as an example of how an aging mall can remain fresh.

Since the recession, Westfield Old Orchard has aggressively added retailers such as Splendid and Madewell so the mall would be more of a draw as the economy bounced back, said general manager Tim Geiges.

Westfield officials spent more than $10 million during the past three years sprucing up the 57-year-old Old Orchard with fresh landscaping; a new, expanded play space for children; “The Cube,” its new entertainment center; and a soon-to-be-completed “valet lounge” that offers a car-parking service and a waiting area for shoppers.

Geiges, who declined to provide Old Orchard’s sales per square foot, credits the upgrades for the mall’s continued success.

“As a company, we looked at it and said there’s a lot of potential,” he said. “If we don’t reinvest, we might be behind the eight ball when the economy does rebound.”

Source: Chicago Tribune September 01, 2013|By Corilyn Shropshire and Becky Yerak
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