The Upper Valley Mall is unlikely to close, despite a recent complaint asking the Clark County Common Pleas Court to appoint a receiver to take over management of the decades-old shopping center, according to a national retail expert.
Wells Fargo filed the complaint last week, citing concerns the mall can’t pay off the remaining $47 million of a loan. The mall, which opened in 1971, plays an important role in the region’s economy and is one of the largest sources of sales tax revenue for the county.
The mall’s struggles aren’t unusual. While shopping centers in high-income areas are thriving, others have struggled to recover after the Great Recession as consumers have curbed spending on items like clothes and entertainment, said Howard Davidowitz, of Davidowitz and Associates, a retail consulting firm in New York.
Despite the legal fight, he said malls in similar situations have remained open, although often under a new owner who sees value in the property.
“You can’t just close a mall,” Davidowitz said. “You’ve got people who have legal contracts, and they’re called leases. You have people in the mall who own property, so this is extremely complex.”
Macy’s and Sears own their locations in the Upper Valley Mall and aren’t included in the complaint.
Officials from Wells Fargo declined to comment, and officials from Simon Malls, which operates the property, didn’t return calls seeking comment.
The Upper Valley Mall filed a response to the complaint, denying many of the allegations set forth in the complaint. Attorneys representing the mall couldn’t be reached for comment.
Wells Fargo asked that Krista Freitag, of E3 Advisors, be named as the receiver of the property, according to court records. That firm didn’t return calls seeking comment.
No hearings have been scheduled yet regarding the complaint.
Typically, a receiver is sought to work with all parties involved, Davidowitz said, and get the best possible value for the lender before finding another buyer.
“This would be a very long process but there’s no way in the world the mall is just going to close,” Davidowitz said. “That won’t happen.”
The most likely scenario, Davidowitz said, is Wells Fargo will try to find an appropriate buyer who will compensate the bank at a fair value and sees potential in the property.
“Somebody has got to come up with something,” he said. “It could be a new lender, it could be, for example, a hedge fund that owns real estate. It doesn’t have to be a shopping center developer.”
Green Street Advisors, a real estate research firm based in California, rates every U.S. mall on a scale that ranges from A++ for the most productive malls to D for malls that are dead. The company rated the Upper Valley Mall as a B-minus.
A 2014 report from the company describes B malls as stable, with solid occupancy, a mix of national and regional tenants and generally stable sales. It describes C malls as those at a competitive disadvantage whose long-term viability is often in question.
“A mall is a fragile ecosystem,” the report states. “Success depends on a symbiotic relationship between retailers and consumers within the trade area. This relationship can be disrupted by changing demographics or competing supply.”
It’s not clear how often malls face a situation similar to the Upper Valley Mall, said Jesse Tron, a spokesman for the International Council of Shopping Centers, a trade group that represents malls and shopping centers. However, he said the industry in general is healthy.
“By and large the industry is doing quite well,” Tron said. “Obviously there are pockets of the country where demographics are still impacted where they’re not doing as well.”
The report from Green Street Advisors says numerous factors affect a mall’s performance, including physical quality, location, competition and the quality of anchor stores. Issues like online shopping are also a threat to the industry’s growth. The report showed malls serving high-income residents are in the best position to succeed.
“ The risks to the bottom of the mall business are significant as a diminished middle class spends a stretched dollar often away from the mall,” the report says.
Local leaders have been advocating for the mall with Simon Properties for several years due to its importance to the region, said Horton Hobbs, vice president of economic development for the Greater Springfield Chamber of Commerce. Although it’s not yet clear what the complaint means for the mall’s future, he said those efforts will continue.
“Obviously the mall is important to the community for sales tax generation, and we have in the past and will continue to work proactively with Simon Properties Group to advocate for continued investment in the mall,” Hobbs said.
Clark County Commissioner John Detrick is optimistic about the mall’s long-term future.
“We still have some opportunities with this receivership situation,” he said. “This is definitely a salvageable situation.”
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