Along with a dwindling number of stores, shrinking foot traffic, years of deferred maintenance, at the SouthShore Mall in Aberdeen, now add to the challenges facing mall management, a disagreement with the county over property taxes and with the state over a ground lease the mall pays for a portion of the parking lot.
Mall manager Jamie Walsh concedes it’s been one of the biggest challenges in her life to attract not just people, but stores to the mall, which is the only one in the region.
“It’s like life or death for this mall,” she said.
The mall appeared to be on its last legs when previous owner General Growth Properties declared bankruptcy and started selling off some of its less desirable properties nationally, including the SouthShore Mall. A new ownership group from New York specializing in buying run-down malls purchased the property in August of 2012.
“I really had a lot of hope, but I haven’t seen much actually happen,” said Aberdeen Mayor Bill Simpson, who worked at the mall for years as part of the management team at JCPenney. That store, one of the anchor tenants, has since closed.
A glimpse into the leasing records of SouthShore Mall was opened recently when the mall ownership decided to appeal its property tax valuation. A Grays Harbor Assessor’s Office appraiser dropped the value of the mall by 10 percent, but mall owners argued it should have been dropped by more than 80 percent. The records show that as stores’ leases have expired or are getting close to expire, they’ve been closing up.
“We’re bleeding,” Walsh said. “And we’re trying to stop the bleeding.”
Walsh said the addition of youth-friendly video game and comic book retailers are geared to attract a younger group to the mall; along with the regular mall walkers. But with Sears as the only real apparel store left, it’s left a bad taste in many shoppers’ mouths.
“There’s a guy who wants to open an ice skating rink in the mall and is trying to get money to do it,” Walsh said. “There’s a guy who wants to put a skate park in the mall. … The county’s unemployment is a problem. We get the people who have the money in their pockets coming to our mall and that’s it.”
Walsh says if a tenant can’t be found for the old JCPenney site, it might be able to be repurposed as a convention center.
She noted, on a happy note, that two stores had recently opened in the mall.
Prior to the sale, the Grays Harbor Assessor’s Office listed two parcels owned by General Growth Properties at the mall address on South Boone Street, with a combined certified value of just over $6 million, which had been assessed in 2009. The 15.5-acre and 8.8-acre parcels include the JCPenney building and the rest of the mall except for Sears. The two one-story buildings were completed in 1981 and the quality was listed as “average” by the assessor. The mall, made up of two parcels, was sold for $1 million. But upon a new appraisal, the county’s commercial appraiser Bill Brown saw the sale as more of a “fire sale” that didn’t necessarily represent the true value of the mall. Brown chose to appraise the value of the mall at 90 percent of its previous value, which works out to just shy of $5 million. Higher property values for the mall equated to a higher property tax bill that the mall would have to pay.
“We inherited a mess from General Growth Properties,” Walsh testified before the county’s Board of Equalization during a hearing in Montesano last month.
Last year, JCPenney closed, though it continued paying rent up until last month, according to the records. In recent months, as their leases have expired, Maurice’s clothing store closed, a Christian book store closed, Habitat for Humanity moved its store out of the mall and several smaller stores in the mall, including a furniture store and a gift shop are in the process of closing — all at the end of their leases.
Sears actually owns its own building and parking lot at the mall and just has a lease for easement and access into the mall. That lease expires on Nov. 10, 2015. Simpson, a former division manager at JCPenney, is among those wondering if Sears might throw in the towel, too. “That’s the big question,” the mayor said.
In all, 22 stores have their leases up by the end of January of 2015. Every store that had its lease expire earlier than that has already left the mall, the records show.
The Bank of the Pacific has the longest lease, going until May of 2018. The movie theater, operated by Coming Attractions, had just renewed its lease a couple months before the mall was sold. That lease now goes until the end of January of 2018.
Even with all of the expiring leases, it’s not clear how much money the mall is making — or if it’s making any money at all. The owners of the mall declined to release specific financial information to the county, citing privacy reasons. Brown told the Board of Equalization that without a look at the mall’s books and without any mall sales to compare the sale to in the region, his only choice was to figure out what the depreciated value of the mall could be with all of its problems. The Board of Equalization recently denied the mall’s appeal.
“It’s an invasion of the owners’ privacy to look at the books,” Walsh said. Instead, she said the county should have looked at other depreciated mall properties around the country. She and Stan Sidor, a private commercial appraiser, provided valuations for mall properties from Pennsylvania to Spanaway as indicators for what the mall could be valued at.
Walsh says the mall plans to appeal the decision to the state Board of Tax Appeals. And, since the county has moved to an annual revaluation process, she says they’ll appeal future revaluation decisions made by the county, too.
The issue with the taxes is coming at the same time the state Department of Natural Resources is demanding that the new mall owners start paying more than $100,000 annually to retain a lease for parking at the mall. Although Sears owns its building and parking area, and the mall owns its two parcels and the rear parking lot; the state actually owns the parking lot in front of the old JCPenney’s side.
The records show that the mall was paying $15,000 per month back in 1980. But every five years, it’s gone up exponentially. By 2000, the rent for the parking was $46,048. In 2005, it was $66,798. Today, the mall owners are expected to pay $100,198.
“It’s not worth $100,000 for a piece of pavement,” said Walsh, who has been taking a closer look at the original lease. “We just received a d0-or-die notice — and if the state doesn’t get payment from us, there could be a lawsuit coming.”
At some point, Walsh half expects the state to construct a giant fence around its corner of the vvproperty.
The records show that the mall is leasing about 32 percent of its space as of March, with 85,615 square feet of space leased out of 265,780 total leaseable space. Take away the 3,754-square foot community room, which is not always used, and the leasing rate is more likely 30 percent. As a comparison, when the mall was sold in August of 2012, about 45 percent of the space was leased.
A consultant for the city of Aberdeen recommended recently that the city support a move of the movie theater out of the SouthShore Mall to the downtown area as a way to help boost the downtown. Such a move, Walsh said, may very well be the death knell of the mall. “That was like a casual comment but it would devastate the mall,” she said.
Coming Attractions founder John C. Schweiger told The Vidette that he knows very well he’s now the mall’s biggest client. The local theater chain was started in Ashland, Ore., and is used to dealing with rural areas, but he says the SouthShore Mall is one of the weakest properties for the company.
Schweiger was pretty clear that he has no intention of extending his lease with the mall unless he gets a drop in the rent. He said he almost walked away from the mall entirely when General Growth wanted to raise his rent. Instead, they reached terms to keep it the same. Now, he says even that rent is too high for the quality of the mall and the lack of other stores present.
“I’m not going to be extending my lease unless I get a reduction in rent,” he said. “Why do I say that? When I signed my lease with General Growth Properties I signed it with the assurance it would be a robust mall with lots of businesses in there. I’m about the only one left. It’s getting a little lonely out there. … And I will say manager Jamie Walsh is working extremely hard. I wish I could give her some advice on something to do. … You just make it inexpensive to people to open their business in there and get people starting to come back. You can’t expect a tenant to pay prime rent when you have subprime property.”
Simpson says he has wondered if it would just be cheaper to tear the mall down and see what else would make sense to go there. “Maybe it would give the college a chance to extend out, but I don’t know if they would do that either,” Simpson said.
TEAR IT DOWN?
In February, the mall commissioned the Wool-Zee Company out of Bellingham to do an assessment to figure out just how much money would need to go into the mall to get it back in shape. The estimate found that it would actually be cheaper to tear the whole mall down and build a new one, estimating that the “cost to cure” the mall with a remodel is $41.6 million, compared to just demolishing the mall and building a new one, which would cost about $35 million, though principal estimator Matthew Woolsey writes that “mall management staff has informed me that there are several non-construction related items that could easily close that gap.”
The Feb. 25 cost estimate and opinion were included in the revaluation information looked at by the county.
Woolsey made sure to note that the mall continues to be “safe for inhabitants,” despite the issues with the rolling, uneaven floors and wall problems and a few minor areas of leaking and seepage of rainwater.
Walsh, a licensed architect in addition to being the mall manager, said that the mall is “absolutely safe.”
“When I first got there, I was worried because I heard all the stories about the mall,” she added. “I think the SouthShore Mall is a safe building. It does have issues. It does have deferred maintenance and it does have wavy floors.”
The problem, Walsh said, stemmed from construction of the mall from the very beginning. There were “enough friction pilings driven for the structure, but not for the infill. … We have empty buildings in Aberdeen that may be sinking, but are sinking evenly. … We have a building that has survived three earthquakes and Grays Harbor, itself, is using the mall as a safe place. The county believes that if everything else is leveled, there’s a good chance the mall is still standing.”
“Hopefully, there will be some miracle that will turn things around,” Schweiger said. “I think the mall is struggling. It’s going to take something major to be a real draw and help draw others. It’s all about disposable income. We’re trying to be as economically viable as we can for the community. … Without my rent, I don’t believe the mall would survive. I’m not making any money. I’m just hanging on.”
For a longer story on the financial problems facing the mall, see the April 10 edition of The Vidette or visit www.thevidette.com with a subscription.