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Near-empty corridors, a 40 percent storefront vacancy rate and changing shopping patterns are challenging FairOaks Mall, a 25-year-old property that faces increased efforts by its lender to foreclose on the property at a sheriff’s sale.
FairOaks Mall, the largest shopping mall in Columbus, had 22 vacancies last month among its 55 available storefronts. A sampling of its customers and some of the mall’s own tenants find that trend worrisome.
The mall’s storefront vacancy rate is higher than industry averages. Less than 9 percent of nearly 50 million square feet of total retail space in the greater Indianapolis area was empty last year, according to a recent analysis by C.B. Richard Ellis real estate research.
Visitors to FairOaks in recent weeks also pointed to other indicators, including what they perceived as little retail energy.
“I notice there aren’t as many people here,” said Sherry Louvins, a Brown County resident who works in Columbus and was shopping at
FairOaks on Thursday after her workday ended.
Another mall visitor, Kathy Busselberg of Columbus, described FairOaks as more of a place for mall walkers than mall shoppers while at the shopping center last month.
“It’s just really sad. You wonder how some of these stores are able to make it with so few people coming in,” said Busselberg, reading a book alone on a bench in the mall’s main corridor.
Vacancy levels also have gotten some shopkeepers’ attention.
“We have a few too many empties (vacant stores),” said Stephanie Crosby, manager of Kirlin’s Hallmark shop at the mall. She said last year’s sales at her store were up a bit from 2011 but still below 2010 revenues.
After learning of the push for a sheriff’s sale last week, she said: “I’m not sure how to react. I know litigation can take a long time.”
Steve Heiwig, owner of the Picture This frame shop, said his store has become a destination for people in the area who need framing services.
Sales at his store also were up in 2012, he said, “although not very much.”
“We’re happy with the mall,” he said.
FairOaks Mall’s managers in Columbus declined to discuss the mall’s performance, citing company policy. Patricia Tesluk, an Indianapolis-based Veritas Realty executive who oversees leasing at FairOaks, also declined to comment.
Attorney Zeff Weiss, who represents Fair Oaks Mall Acquisition LLC, the limited liability corporation that owns FairOaks Mall, didn’t return repeated phone calls seeking comment.
State records show the managing member of Fair Oaks Mall Acquisition is real estate developer and investor Menashe Frankel of Lakewood, N.J.
However, no one answered calls or returned voice mails left on a business phone listed in Frankel’s name, most recently Friday morning.
National tenants at the mall — Carson’s department store, J.C. Penney and Limited Brands, which owns Bath & Body Works — declined to comment on FairOaks’ condition or sales totals, saying the data is proprietary.
Howard Riefs, a spokesman for Kmart, while declining to discuss sales results, said Friday the chain “continues to serve its members and customers at the FairOaks Mall and remains committed to the Columbus community.”
Several smaller tenants did comment, however, on the declining number of customers in stores and the mall’s common areas, especially in the evenings.
“All year long, the mall never helps me; I help them,” said restaurateur Victor Ma, owner of Mark Pi’s China Gate restaurant, which operates in the mall’s west wing near Hibbert Sports and Carson’s.
On Thursday, Ma said he was surprised to learn of Wells Fargo’s push for a sheriff’s sale as early as this spring.
“I ask the mall manager (Veritas Realty), and nobody seems to know what’s going on at all. I just pay my rent every month,” he said.
Most Columbus consumers skip shopping at FairOaks these days, Ma said, although he feels the mall does draw its share of consumers from outlying areas such as Hope or other smaller towns.
Ma said his 21-year-old restaurant has built enough of a reputation that it draws regulars and, in particular, does a good lunch business.
“But I wish the mall would draw in more traffic. In the evenings, there’s no one here,” he said.
Real estate analysts say the only thing that might make the 415,000-square-foot mall viable again would be a makeover that seeks out more alternative uses for vacant spaces — anything from community college satellite classes, to dentists’ or accountants’ offices and boutique food stores.
One such nontraditional tenant is Cummins Inc., the Columbus-based engine manufacturer, which leased office space in the mall’s northern wing.
Cummins moved some information technology personnel and manufacturing employees into 25,000 square feet in a former Goody’s clothing store at the mall Aug. 1, 2011, said Jon Mills, a Cummins spokesman.
The Tennessee-based Goody’s chain filed for bankruptcy in 2009 and closed its stores, including the FairOaks location.
The brand name later was purchased by a group of entrepreneurs, and some stores since have reopened under the Goody’s flag in parts of the U.S., including one in Greensburg.
Another nontraditional tenant at FairOaks is the Dancin’ DJ’s event center, which occupies a storefront that once housed a now-defunct chain record store.
Dancin’ DJ’s, run by a husband and wife who offer all comers $5 swing and salsa dance lessons, rents its space for high school dances, hosts corporate events and stages wedding receptions in a 4,800-square-foot location.
Jean Kingen, co-owner of Dancin’ DJ’s, said she and her husband, Don, moved into the former record shop space two years ago and installed a 1,400-square-foot dance floor.
“We don’t need (people) traffic going by; we’re not a normal mall tenant,” Jean Kingen said.
Tough competition mounts
Retail analysts said FairOaks’ problems include stiffer competition from other retail outlets within driving distance, including Greenwood Park Mall south of Indianapolis, Edinburgh Premium Outlets just north of Columbus or Circle Centre mall in downtown Indianapolis.
Rich Moore, a retail analyst with RBC Capital Markets in Solon, Ohio, tracks investments and sales of malls.
When a property starts to lose too many retail tenants, it becomes difficult to attract a buyer who wants to keep it as an enclosed mall, he said Friday.
“You have winners and losers in retail. You have malls where people want to shop, and other malls where people don’t want to shop at all,” he said. “(Owners) discover it’s difficult to attract tenants no matter how low they make the rents.”
At FairOaks, the best scenario may be “some local guy comes in and buys the place with a vision for transforming it into something more centered on community or educational services or even church,” Moore said. “The property is still real estate, and most real estate typically has some use.”
But the odds are slim that a real estate investment trust, known as a REIT, or large mall ownership group would be interested in buying FairOaks, Moore said.
“REITS don’t want middle-market properties, and especially if the mall is underperforming,” he said. “Bad malls don’t get rejuvenated. They just tend to go away.”
Andrew Johns, an analyst with Green Street Advisors in Newport Beach, Calif., said the major real estate companies generally don’t want to throw good money after bad by buying distressed malls in middle-to-small markets.
“Distressed malls are a lot of work for the income potential and total value you might get back,” he said. “In cases like (FairOaks), usually local guys or regional investors who remember when a particular property was successful jump in and say, ‘I can do something with that.’”
Making investment pay off
The catch, though, is they’re only interested at a low purchase price.
“If someone is going to come in and tear down half of it, and maybe try to turn it into a power center with some outward-facing, not enclosed retail, that’s pretty expensive to do. They can’t pay a lot of money for the asset,” Johns said.
Mark Pratt, a commercial real estate broker in Columbus with Breeden Inc., said he sees little hope that FairOaks can engineer a resurgence as a retail center.
“I don’t know what’s on the horizon that could change things. Investing in brick-and-mortar (stores) is risky,” Pratt said.
“Malls in general are a difficult fit in second- and third-tier markets like Columbus. That’s why you see so many malls for sale.”
The term first-tier mall generally refers to luxury retail properties in the nation’s top 50 retail
That category of mall often is found in cities such as Chicago, New York and Atlanta, or in affluent suburbs close to big cities. Second- and third-tier malls are those considered to be in less appealing or lower-traffic locations, or in smaller cities and rural parts of the country.
Compared to FairOaks, the 85-store Edinburgh outlet mall has more recognizable brand names, carrying such retail flags as Charlotte Russe, Jockey, Nine West, Calvin Klein, Eddie Bauer and Michael Kors.
Aeropostale and Hibbett Sports are among the handful of notable names at FairOaks in addition to the property’s three remaining anchor department stores — Kmart, J.C. Penney and Carson’s.
Small shops at FairOaks include one that offers haircuts; another that does manicures under the banner Silky Nails; and a beauty shop that performs eyebrow threading.
“FairOaks probably needs to be renovated or repositioned,” suggested Cindy Hoskinson, vice president of Lee & Associates real estate in Indianapolis.
Hoskinson handles leasing for The Shoppes at River Bend, a competing development with a half-dozen tenants in the 3700 block of Jonathan Moore Pike, west of Interstate 65 in Columbus.
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