$47 million — Amount of loan Simon Management Associates defaulted on for Upper Valley Mall
73 — Acres on mall property
739,000 — Total retail square feet at the mall
43,768 — Total households in a 7.5-mile radius
Source: Urban Retail Properties LLC
The Upper Valley Mall — a focal point for Clark County shoppers and a major sales tax generator since it opened in 1971 — is at a crucial crossroads.
Increasing competition, the changing habits of customers and recent legal issues have created uncertainty for its future, but the mall’s new managers have pledged to invest in it and store owners are optimistic.
Urban Retail Properties recently took over running the property after previous owner Simon Management Associates defaulted on a $47 million loan.
Malls across the U.S. are in a precarious position as family incomes haven’t fully recovered from the Great Recession, retail experts said, and many increasingly seek nontraditional tenants that don’t pay as much rent as retail and anchor stores.
Local leaders are hopeful the new management will attract the right tenants and lead to investment in the surrounding area.
“The mall is the magnet for that (Upper Valley) corridor,” said Horton Hobbs, vice president for economic development for the Great Springfield Chamber of Commerce. “With new management, any investment they make to that mall is going to be beneficial, but it’s also going to be helpful for the neighboring properties as well. When you see investment it can tend to leverage other investments in and around that area.”
Plans to add retailers
Urban Retail was selected to manage the mall this summer after Simon defaulted on a $47 million loan from Wells Fargo, which owns the property. Urban Retail will be in charge of improving the value of the mall while the bank likely seeks a buyer who sees value in the property, experts have said.
Macy’s and Sears own their locations at the Upper Valley Mall and aren’t included in the legal case.
Several scenarios are possible, including Wells Fargo selling the site to an owner interested in continuing to operate it as a mall. The site could also be sold for another use, said Howard Davidowitz, of Davidowitz and Associates, a retail consulting firm in New York.
“This is is something, honestly, that could take a year or two, or it could take three months,” Davidowitz said. “It is impossible to know the answer, and they don’t know it either unless they have people they’re already talking to.”
In the meantime Urban Retail will invest in the property to make it more attractive to shoppers and potential tenants, said Jim Roberts, senior vice president of marketing and communications for the Chicago firm. The company specializes in revitalizing regional malls in areas like Springfield, he said, and operates similar properties in 12 other states, including Michigan and Iowa.
Initial upgrades include new carpeting and paint, refurbished bathrooms and exterior landscaping within the next two months. Urban Retail has also placed an emphasis on special events and activities to draw foot traffic, said Brenda LaBonte, general manager of the Upper Valley Mall.
“We’re still new on the case and we’re doing our best to examine and review the property and what we can do to attract new retailers that would be exciting and interesting to shoppers,” Roberts said, noting that the mall hasn’t seen major upgrades since the 1970s. “One of the first things we recognized was the physical property could be refurbished and strengthened.”
The mall has lost some big stores in recent years, including Old Navy, Charlotte Russe and Elder-Beerman.
Urban Retail wants to add new tenants that would be a good fit for the region, Roberts said, although he declined to name specific stores.
“We feel that a fresh addition of a few key retailers here and there could really do some good for that property,” he said.
Retail is changing and many malls, including Upper Valley, are increasingly bringing in nontraditional businesses like restaurants and grocery stores to draw in customers, according to a 2014 report by Green Street Advisors, a real estate research firm based in California.
The Upper Valley Mall has done that, filling the large gap left by Elder-Beerman with the Boonshoft Museum of Discovery. A church group took over the former PacSun store and Home Plate Sports batting cages is in the former Old Navy.
The museum addition in particular, LaBonte said, has brought families to the mall.
That trend is likely to continue as malls evolve, said Jesse Tron, a spokesman for the International Council of Shopping Centers, a trade group that represents malls and shopping centers.
“There is an increased focus on creating an experience for the consumer,” he said. “It is no longer good enough to just be a distribution channel for goods and services.”
Overall most malls are faring well, Tron argued, and seeing occupancy rates of more than 90 percent, which is back to pre-recession levels. The trend to offer groceries, entertainment and restaurants is to adapt to consumer preferences, he said.
But Davidowitz said malls are often in trouble when churches, bowling alleys and similar businesses start to appear because they usually cannot pay the same rents as traditional retailers.
“When you see all this happening, it’s bad,” Davidowitz said. “They have not been able to attract tenants that are going to attract other tenants.”
The challenge for Urban Retail will be to find non-traditional tenants that will draw shoppers, Davidowitz said, which in turn will make the mall more attractive for other potential tenants. To do so, he said Urban Retail will have to be creative, and possibly offer a bargain to attract the right tenant.
“Maybe they can give some of these guys a great deal and then maybe they can start to attract other stores. But without that they can’t attract anybody,” Davidowitz said.
Finding the the right mix of retail, entertainment and restaurants will ultimately decide whether a mall is successful, said Roberts of Urban Retail.
“What we’re doing is we’re redefining what these malls are,” Roberts said. “Apparel, jewelry and shoes, we’ll always have that. But we need to have something more. We’re trying to do our best in what a mall means in these markets.”
Signs for optimism
Several store managers in the mall said they are optimistic Urban Retail will succeed in making Upper Valley more competitive.
Darryl Yount, store manager at the Sears there, said he’s worked at a failing mall but believes Upper Valley is in a better position. He previously worked at a Sears at the Salem Mall before it closed, and said Upper Valley has a more stable base of customers.
“There’s not that overwhelming sense of negativity,” Yount said. “The water there was coming in faster than you could bail it out. You’ve got a much more solid economic base here.”
Sears is in the process of adding a 1,400-square-foot mattress department, and Yount said the company wouldn’t invest locally if it had concerns about the mall’s future.
Storm Mixed Martial Arts also recently became a tenant in a roughly 4,000-square-foot location, owner Sandy Bise said. Upper Valley is a good fit for her customers, she said, because of its visibility and location.
Bise consulted with other business owners before moving in permanently, and was convinced the mall was the best fit for her business. The location allows parents to shop while their children take martial arts lessons.
“There’s a commitment to making things work,” Bise said.
One of the challenges Upper Valley faces is competition from other shopping areas in Columbus and the Miami Valley.
Florian and Kayla Crow, of Springfield, visited Upper Valley earlier this month for the first time in several months. They said they typically shop at the Mall at Fairfield Commons because of the greater variety of stores in the surrounding area.
Other shoppers, like Victoria Rousculp, said Upper Valley is important locally because it’s more easier than driving to Greene County. It has fewer stores in the area, she said, but she typically starts shopping in Springfield because it’s more convenient and she usually finds what she needs.
“It beats driving 35 minutes,” Rousculp said.
Websites and numerous news stories have focused on the death of malls, but the industry’s future is more complicated, according to a 2014 report by Green Street Advisors.
Sales, occupancy rates and local demographics all play a role in whether a mall succeeds, the report says.
It estimates about 15 percent of malls in the U.S. could close or be re-purposed in the next 10 years.
Because residents with high income spend the most on clothing and shopping, malls that serve that population are most likely to have the best chance for success. Malls also face risks such as increases in online shopping and economic struggles at some anchor stores such as JC Penney, according to the report.
“Wealthy households have been faring well due to the precipitous rise in the stock and bond markets,” the report shows. “A recovery in home prices could fuel demand at lower-quality properties, but home wealth into sales could take time.”
The report lists B malls as stable, while C malls are considered to have low sales productivity in general. Malls rated C and lower are considered those most at risk.
Green Street didn’t release figures for all malls in the region, but lists the Upper Valley Mall and the Mall at Fairfield Commons in Beavercreek as a B-minus. The Greene in Beavercreek is rated as an A, while the Dayton Mall is rated as a C-plus.
Malls can be successful if they have the right mix of retail and entertainment, Roberts said, regardless of the demographics of the area.
“At the end of the day it’s about what retailers are in that property,” he said. “If the retail mix is right for that community then it doesn’t matter what the market is.”