COVID-19  October 1, 2020

COVID, online sales force changes to malls

Shopping centers through Northern Colorado and the Boulder Valley were, for the most part, beginning to show stress lines prior to the onset of the COVID-19 pandemic, yet the forced closures of many stores that were deemed nonessential by public health agencies exacerbated problems.

The result might be adaptation at a more rapid rate than would otherwise be the case, even after retail activity resumes in a more-normal fashion post-pandemic.

Experts suggest that traditional indoor malls may have seen their better days. The wave of redevelopments toward outdoor or lifestyle malls that began in earnest a decade or more ago continues, but COVID, coupled with pressures from online shopping, will propel even more changes.

Stenn Parton, a retail expert with DJM Real Estate LLC, a California-based company, told BizWest in August that psychological impediments that some shoppers have toward spending extended periods of time indoors with strangers will drive customers to outdoor venues that feature patio dining and stores with smaller footprints.

Developers will find, he said, that mixed-use shopping districts are likely to have the best success. Such centers will feature retail, along with entertainment, dining, recreation, offices and more.

“Perhaps you could convert department stores to offices, bring in multi-family [residential units], or hospitality,” Parton said then.

Retail centers also face headwinds from online shopping, which accelerated during stay-at-home orders throughout the nation. Parton said one likely evolution of retail centers could help bridge the gap between e-commerce players such as Amazon and brick-and-mortar operators.

“Regional malls are tremendous locations for last-mile distribution,” he said. Increasingly, online shoppers may order goods from Amazon only to have those orders delivered from distribution centers located within the same department stores Amazon helped put out of business.

What follows is a review of the major malls in Northern Colorado and the Boulder Valley.

Foothills, Fort Collins

Opened in 1972 as Foothills Fashion Mall in midtown Fort Collins, for decades the 753,000-square-foot enclosed shopping center was retail’s shining star for miles around, drawing throngs from Cheyenne to Longmont and beyond. But as trends changed and the mall lost two of its four anchor stores, Foothills fell into decline, prompting the city of Fort Collins to deem the mall a blighted area and approve an urban-renewal plan. The mall had generated 6.1% of the city’s overall sales-tax collections, but that had fallen off to 2.6% by 2010.

Chicago-based mall owner General Growth Properties Inc. filed for bankruptcy in 2011, and the site soon was sold to Chicago-based Walton Street Capital and Denver-based Alberta Development Partners. Alberta announced an ambitious $313 million redevelopment plan, including a new youth center and multi-screen theater as well as an underpass to connect the mall to the MAX rapid-transit line across College Avenue on the Mason Street corridor.

Even before the COVID-19 pandemic, however, Foothills had fallen short of its financial goals. For instance, the city — which had aided Alberta with a $53 million incentive package — projected $8.6 million in sales-tax revenue in 2016 but got $3.1 million; it expected $9 million in 2018 but received $3.8 million. The occupancy percentage hovered in the 70s.

As the pandemic forced stores to close or limit access this spring, Macy’s sold its 128,550-square-foot building to Walton Street Capital for $5.5 million.

An inside joke at the mall for six years was the lack of a coffee shop at the mall, a problem finally rectified this summer when Lima Coffee Roasters announced plans to open, along with two eateries, Boulder-based Modern Market and Cava, a Mediterranean-themed restaurant. But CB & Potts closed its Foothills location and all but one of its outlets in Colorado.

Greeley Mall

A vacant 2.5-acre parcel of dirt left by last year’s demolition of the 86,000-square-foot building that had been occupied by a Sears department store is a visible symbol of hard times for the Greeley Mall, which opened in 1973 with four anchors and went through a major renovation in 2004.

A study released in August by financial technology company SmartAsset ranked Greeley tied for 35th in the country among top rising housing markets, but COVID-19-related restrictions and this summer’s announced closure of the JCPenney department store have been tough to swallow for the shopping center owned by Moonbeam Capital Investments. Most recently,  still, an ongoing slate of community events including dance recitals and consignment sales have kept customers coming in — despite a brief closure of the mall in March.

Half-empty when Moonbeam purchased it in 2012 for $6.1 million — six years after Chicago-based GK Development bought it for $41.4 million — the mall’s occupancy was boosted to 70% by 2015, when home decor superstore At Home took over the 95,000-square-foot space that had been vacated by Dillard’s seven years before.

By the end of 2018, the city of Greeley collected more than $2.7 million in retail sales tax from businesses in the mall area, 4.88% more than in 2017.

Village at the Peaks, Longmont

The suicide death this past July of Village at the Peaks founder Allen Ginsborg, 59, coupled with severe economic impacts of the COVID-19 pandemic and knowledge that the $90 million redevelopment of Twin Peaks Mall in Longmont had a rocky start led many to speculate that the mall project could be failing.

But that’s not so, according to a city of Longmont review of sales-tax collections. The mall is generating more than sufficient tax-increment growth in both sales and property taxes to make the payments on the city of Longmont’s bonds and sock away more than required in reserves.

Ginsborg and his company, NewMark Merrill Mountain States, razed and redeveloped the ailing Twin Peaks Mall and opened Village at the Peaks in late 2015.

The opening was slower than anticipated due to delayed openings of two of the mall’s largest sales tax generators — Sam’s Club and Whole Foods. The 11-month delay of Whole Foods alone cost the city $1.04 million in unrealized sales-tax revenue.

Then Sports Authority shut down its stores, including the closure of the Village at the Peaks store in July 2016.

The city dipped into reserves that year to pay $636,227 that was due June 1.

Developers continued to chip away at vacancies. In August 2019, for example, it added two tenants to the former Sports Authority space — Nothing Bundt Cakes and Burlington (NYSE: BURL), the clothing retailer. Bank of America also joined the mall with a facility.

When the pandemic hit this year, restaurants, retailers, gym and the movie theater at the mall took a hit, but the anchors, three of which were considered essential businesses, had gangbuster sales, according to Jim Golden, city finance director.

In the fourth year of the urban redevelopment authority, Golden told the Longmont city council, sales-tax revenue through October 2019 was $4.2 million. The city directed $730,324 of that to its debt service fund for the mall. About half of that amount, $348,337, went into reserves, bringing the reserve account to $867,000.

Golden told the council that the sales-tax revenue in 2019 was $3.4 million more than what businesses on the mall property were generating in 2012.

“While the COVID-19 crisis is impacting sales-tax revenues, the debt service is not in jeopardy. There is already over $2.1 million of pledged revenue in 2020 and there was a reserve of over $844,000 at the start of this year,” Golden wrote in his report to the council. … Despite restaurant impacts, the sales tax from the Village at the Peaks has fared well as the three largest revenue anchors are all doing strong business.”

Promenade Shops at Centerra, Loveland

A major investment and some help from the city of Loveland highlighted events that provided some good news for the 15-year-old Promenade Shops at Centerra, the 700,000-square-foot open-air “lifestyle center” at Interstate 25 and U.S. Highway 34 that features dozens of national retailers and is anchored by Macy’s, Best Buy and Barnes and Noble.

In August, the Loveland City Council gave final approval to a plan to give $250,000 in incentives — including $200,000 in cash from the city and $50,000 in waivers of building permit and construction use taxes — to Metropolitan Theater Corp. to help it complete a $3.5 million project to turn two smaller theaters at its Metrolux 14 in the Promenade Shops into an IMAX theater.

The center, developed by McWhinney in partnership with Poag & McEwen Lifestyle Centers, opened in 2005. Even with pandemic-related restrictions beginning to take shape in spring, new shops were opening in Centerra, including high-end beauty-product retailer Sephora.

The Promenade Shops were reported in May to be for sale with Jones Lang LaSalle as the listed broker. The shops, owned by New York private equity firm DRA Advisors, are about 500,000 square feet in size with reported sales of about $143 million. The shops were said to be 88% occupied in May.

FlatIron Crossing, Broomfield

Macerich Co., owner of Flatirons Crossing mall in Broomfield, plans to redevelop its shopping center and may follow the trend of making the development more mixed use, with office, industrial and perhaps housing there in addition to retail.

The closure of Nordstrom in June paves the way for redevelopment at the mall. Nordstrom Inc. (NYSE: JWN) closed 15 stores beginning in June.

Preliminary conceptual plans for the mall call for the phased construction of a 100- to 200-room hotel, 650 to 850 residential units, 415,000 square feet of office space, a five-story parking garage with 850 spaces and a 3,000-square-foot pavilion to be built just south of the existing Nordstrom site.

The mall hopes to put a premium on outdoor spaces, much in line with concerns that the pandemic raised with people who wish to limit their time indoors with strangers.

Twenty Ninth Street/Macy’s, Boulder

The open-air retail center at 29th Street in Boulder, also owned by Macerich,  continues to produce results in Boulder although exact numbers were not available. The center, which produces 8% of Boulder’s total sales-tax revenues, is a mix of restaurants and retail and soon may also have more office-related activity. The center is the largest single property for retail sales tax in the city.

It was reported that the development may have numerous announcements in coming days from national companies — retail, service and restaurants — wanting a piece of the action at a center within easy walking distance of large, good-paying employers such as Google.

Meanwhile, the city is considering proposals from Macy’s Inc. (NYSE: M) to convert the Boulder store located within Twenty Ninth Street to more mixed use, with offices on upper floors. The Boulder store for Macy’s is the first in the country to be considered for adaptive reuse or redevelopment.

The Boulder Planning Board was set to consider the Macy’s proposal in late September. Macy’s hopes to appeal to trends that suggest “live, work, play” developments have the greatest appeal in urban environments.

Dallas Heltzell, Lucas High, Dan Mika and Ken Amundson contributed to this story.

Shopping centers through Northern Colorado and the Boulder Valley were, for the most part, beginning to show stress lines prior to the onset of the COVID-19 pandemic, yet the forced closures of many stores that were deemed nonessential by public health agencies exacerbated problems.

The result might be adaptation at a more rapid rate than would otherwise be the case, even after retail activity resumes in a more-normal fashion post-pandemic.

Experts suggest that traditional indoor malls may have seen their better days. The wave of redevelopments toward outdoor or lifestyle malls that began in earnest…

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