A look at what the new owner of the Steeplegate Mall has done with a couple of similar purchases in other states shows some hope for the future of Concord’s beleaguered mall.
“They’ve done a very nice job filling it up. . . . Getting a Planet Fitness in there, I think that’s one of the big things they’ve got. People coming in for an hour or two and they’re using the mall,” said Mark Gabrovsek, zoning officer for College Township, Pa., home to the Nittany Mall.
The Nittany Mall (named after the Nittany Lions mascot of nearby Penn State) was bought in 2014 by Namdar Realty, a Great Neck, N.Y., firm that has bought “underperforming” shopping centers and enclosed malls throughout the East in the past few years, most recently Steeplegate on Loudon Road.
Steeplegate’s owners haven’t said anything about their plans for the property, which they bought for $10.3 million late last month.
Gabrovsek also praised another unusual tenant at Nittany Mall: a senior center.
“It’s got a kitchen, a place for them to socialize, interact, do crafts – which draws them to the mall, probably a different (clientele) than the Planet Fitness,” he said.
Add to the list that the mall lured Dunham’s Sports, a mid-Atlantic chain, to fill an important anchor slot after J.C. Penney left, and Gabrovsek said the community is pleased so far.
“We talk about it in here. . . . Our mall seems to be coming back around pretty well,” he said.
But Namdar ownership is no panacea. Consider Mall of the Bluffs in Council Bluffs, Iowa.
Namdar bought the mall, which is about the same size as Steeplegate, in 2013 for a rock-bottom price of $8.5 million, or $2 million less than Steeplegate. It soon had second thoughts and put the mall back on the market, only to hold onto it because nobody wanted to buy it for even half that amount, according to John Schreier, managing editor of the local newspaper, the Daily Nonpareil.
These days, Schreier wrote in an email to the Monitor, the mall is limping along, although it, too, has seen success with a new Planet Fitness.
“It’s really no different than when Namdar purchased the mall. . . . The core of the mall remains rather stagnant – though there haven’t been many closures, new retail has been next to nothing,” he wrote.
In some ways, though, limping along isn’t bad for a regional mall.
Recent estimates indicate that one-third of the nation’s malls are facing financial peril because of changing shopping habits. Changes are being driven by factors as diverse as a renaissance in downtowns; the boom in “power centers,” in which several stand-alone stores share one parking lot so people can run in and out of the store of their choice; and the increase in online commerce, notably Amazon.
The overall result has crippled department stores that are the backbone of enclosed malls. Consider Sears, J.C. Penney and Bon-Ton – the three anchors left at Steeplegate. Sears just closed 75 stores, Bon-Ton reported $57 million in losses last year and J.C. Penney almost went bankrupt.
And the situation may get worse. Real estate research firm Green Street Advisors estimated in an April report that department stores need to close as many as 800 more locations, about one-fifth of their anchor space in U.S. malls. The report said that departments stores’ average sales per square foot has dropped 24 percent to $165 per square foot in the decade since 2006.
This is why malls are turning to non-retail tenants like gyms, senior centers, even churches – or, in Steeplegate’s case, venues like Hatbox Theatre and the bounce houses at VI Party Rentals. All of these are better than empty units and help keep up foot traffic to remaining stores, but these tenants usually pay far less rent than the stores they replaced, putting financial pressure on mall owners, particularly those that piled up a lot of debt when buying the malls.
Enter Namdar. The company plays its cards close to its vest and has not returned the Monitor’s calls, but it appears to be well-regarded in the industry.
“Our focus is purchasing underperforming properties and bringing them back to life,” Joel Gorjian, vice president of acquisitions and dispositions, said in a 2015 interview.
Most of its retail holders are smaller strip malls or power centers, but it owns four malls similar to Steeplegate, close to half a million square feet in size.
Typical is Nittany Mall. It is a bit larger than Steeplegate – 533,000 square feet versus about 450,000 – but with a similar layout and even two of the same anchors: Sears and Bon-Ton.
But it has also got the same problems. So many stores have left Nittary Mall in recent years – including Aeropostale, which also fled Steeplegate – that two years ago the local newspaper reported speculation that the mall might close entirely.
In 2014, Namdar bought Nittany and a similar Pennsylvania mall, North Hanover Mall, for $32.3 million. They were sold by a Pennsylvania real estate trust called PREIT that has unloaded more than a dozen malls in an attempt to pay down its debt load.
The two malls cost Namdar almost $33 per square foot, considerably more than the $23 per square foot it paid for Steeplegate – although the Concord property also includes the separate Applebee’s restaurant and TD Bank.
One possible move by Namdar may be to sell off the restaurant and bank. In Council Bluffs, Namdar had the parcel rezoned so that separate buildings that had held a grocery store and banks could be sold or leased separately.
