John Gibson, managing partner of Hull Storey Gibson Cos., in Augusta, Ga., has a formula for saving outdated malls in small American cities.
His firm has acquired 21 distressed malls from lenders and set about turning them around in recent years. Gibson says scoring a success is a matter of developers not overpaying when buying a property and then cutting the retail space down in size to fit limited consumer demand in a smaller market.
Consider what Hull Storey has done in Macon, Ga., as one possible scenario that could play out with FairOaks Mall in Columbus.
In 2010, Gibson’s firm paid $6 million for 35-year-old Macon Mall, a once-vibrant retail center that had fallen into disrepair and lost half its tenants by the time Hull Storey arrived. The 1.5 million-square-foot shopping plaza had been in receivership for two years with an unpaid $111.4 million debt from a previous owner.
Hull Storey stepped in, bulldozed a third of the mall’s space and attracted new tenants to what was left. Gibson said the mall already has seen an uptick in retail sales totals.
A new barbecue restaurant, the Smok’n Pig, opened. A shoe store already in the mall increased its space. Other tenants are interested in filling the few remaining vacant storefronts.
“We’ve turned the corner. We have a number of prospects for two of our bigger boxes for lease. We have another couple of years of work ahead of us, but I believe we’re going to be successful.
“We’re in the fourth inning of a nine-inning game, but I feel a lot better than I did a year ago,” Gibson said in a telephone interview as he drove from Augusta to Atlanta.
Gibson said reviving an enclosed mall in a city with fewer than 100,000 residents — a description that fits both Macon and Columbus — isn’t easy, but it can be done.
Real estate wags who have pronounced the enclosed mall as a dead concept don’t know what they’re talking about, the Georgia real estate developer said.
In 100-degree Deep South summers, or snow-filled Indiana winters, consumers still relish indoor shopping.
How much consumers spend at the mall, though, generally depends on a small town’s jobs picture, how much disposable income residents have and other economic factors, Gibson said.
“Columbus ought to be pretty happy. Since it has an unemployment rate that’s better than the national average, they’re ahead of most
small towns,” he said.
“When we buy malls, we look at what’s the forecast of that community’s economic health. If there’s a favorable projection going forward, that’s an area where an enclosed mall can be successful.”
Competitive factors still come into play, though. Small-town shoppers generally can drive to nearby bigger cities to spend money at more spacious or glamorous malls. And middle-income consumers flock to Walmart super centers for necessities, food, clothing and lots of other merchandise, Gibson said.
“With a smaller-market mall, you might be competing with two Walmarts on either side of town. They can suck up as much as 20 percent of an area’s retail sales,” he said.
“But a well-positioned mall can represent fashion, aspirational spending and not just the necessities of life. It’s not rock-bottom prices.”
Gibson said the issue for developers becomes getting a mall to the right size in terms of square footage, investing enough capital to make the property attractive again and having enough faith to hold on for financial returns that may take a while to materialize.
“Seeing some stabilization doesn’t happen in two weeks or a year. At a minimum, the turnaround takes three, but more likely, five years,” he said.
Reshaping a troubled mall’s tenant base is a matter of negotiations and being smart about filling vacancies with shops that consumers want, he said. If necessary, a new owner can buy out existing leases to jettison lagging stores and free space for more desirable tenants.
“Every deal is different. Everything is negotiable. For a number, a certain number of dollars, people will do almost anything,” Gibson said.