An appraisal of FairOaks Mall suggests the regional shopping center “reached the end of its total economic life” after sinking to a nearly 55 percent vacancy rate of leased retail space with the April 29 departure of Carson’s department store.
That conclusion is from appraiser Gregory S. Watts of Columbus, included in one of two appraisals on the mall property completed in April. The other appraisal was by Pillar Valuation Group, Inc. of Indianapolis.
The Watts market value opinion placed the value of the mall property at $7 million when considered as though vacant, or at $6 million for as-is, less demolition costs. The Pillar assessment of market value was $5.5 million.
Columbus City councilmen gave final approval to purchase the 35-acre mall property at 2380 25th St. from FairOaks Mall Owner LLC for $5.9 million, sharing the purchase cost with Columbus Regional Hospital and the Heritage Fund — The Community Foundation of Bartholomew County.
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City officials expect to close on the property Dec. 14, city finance director Jamie Brinegar said. Environmental inspections returned with no complications, he said.
The appraisals were paid for by the Columbus Capital Foundation, and summaries were obtained by The Republic through a public information request to the city, which was handled by City Clerk Luann Welmer. Welmer said full appraisals could be obtained, but city attorneys would have to redact information containing mall tenant information which could take an extended period of time to complete.
The submitted appraisal reports each note that during the evaluation, the mall property was undergoing significant changes, including the final weeks of Carson’s operating as the anchor on the west side of the mall.
Vacancy, tenant rates
“This departure of Carson’s will increase the vacancy rate from 34.01 percent to 54.22 percent,” the Watts appraisal states. “In addition, the current rent toll (for March) reflects that many of the occupied spaces are paying well below market rent rates for a mall property.”
The mall, which opened in 1990, consists of one regional mall building and a storage building, surrounded by parking areas. The mall portion has 56 retail/restaurant/office spaces available in total, according to the appraisals.
Appraisers were not provided any disclosed agreements for a potential new tenant for the Carson’s anchor space, and therefore considered the vacancy an additional 74,446 square feet of the 360,970-square feet of total net rental space available, according to the Watts appraisal.
“We believe our analysis will reflect that the subject property’s existing improvements in its ‘current condition’ would suggest that the existing mall may provide a financially feasible use in the interim (i.e. the existing Cummins office space) but is nowhere near a maximally productive use for such a large site,” the Watts appraisal states.
Pillar’s appraisal notes that positive factors influencing the value of the mall are a growing, though smaller, trade area with stable household incomes, and the mall building’s good overall condition, with an updated exterior.
Negative or risk factors affecting the mall property were listed as the general market conditions for retail, especially enclosed malls with anchor stores and FairOaks’ somewhat dated interior, the Pillar appraisal states.
At the time of the appraisal in April, the owner’s representative, Patricia Tesluk of Veritas Reality, told appraisers that mall owners were in negotiations with a new tenant that was seeking 150,000 square feet, which would include the Carson’s space and another part of the mall, the Pillar appraisal states.
Tom Brosey, a retired Cummins Inc. employee hired as a consultant to assist with the transaction and plans for the mall property, said at the time of the appraisals the mall was scrambling to fill the empty J.C. Penney and soon-to-be vacant Carson’s spaces. Since then, nothing has happened with any possible tenant for one of the open anchor spaces, he said.
The new tenant had not yet signed a lease, but its potential impact on the income stream of the mall was considered in Pillar’s appraisal of the property, according to its report.
Leasing terms
Since the city is planning on either retaining or hiring mall management services for the next year, the mall will honor current leases for three years, Mayor Jim Lienhoop said earlier. However, some smaller spaces could be rented out to new tenants during 2019 for a limited time frame, Brosey said.
When the city and mall owners began negotiations for the purchase, the mall was not in financial trouble in the sense of losing money, Brosey said. However, when considering the return on investment, losing mall tenants such as Penney’s and Carson’s was creating a shrinking return on investment, and the risk remained of more tenants leaving, he said.
The city’s portion of the purchase of the mall includes using $2.25 million in Economic Development Income Tax (EDIT) funds, $1,337,500 from the city’s general fund and up to another $200,000 in EDIT funds for due-diligence costs, estimated closing costs and necessary capital reserves.
The council also passed a separate ordinance appropriating $500,000 from the Columbus Parks and Recreation Department’s general fund reserves that will be used for the purchase of the mall.
The city’s share — $4,087,500 — reflects 75 percent of the property’s value, while the hospital will pay $1,362,500, as its share of the purchase. The Heritage Fund will provide $450,000 that reflects the difference between the agreed-upon selling price and the appraised value, according to the city.
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The city of Columbus is planning to purchase and transform FairOaks Mall into a year-round community recreational and sports tourism complex, partnering with Columbus Regional Health and the Heritage Fund — The Community Foundation of Bartholomew County.
For at least the next three years, retail businesses operating in the mall — which opened in 1990 — will have an opportunity to be part of the transformation, Mayor Jim Lienhoop said. All existing tenant leases will be honored, he said.
The property could include an indoor recreation center within the mall and an air-supported domed facility developed elsewhere on the site to house indoor softball, soccer, volleyball and other sports, creating a year-round community recreational asset and sports tourism magnet.
Also being considered are indoor soccer competition fields surrounded by a track, indoor softball fields, room for indoor hardwood court sports such as basketball and volleyball and also space for fitness and indoor recreation.
The city hopes to move its parks and recreation department offices from the deteriorating Donner Center to the new mall site as part of the project.
The mall currently has about 400,000 square feet under roof with 15 tenants, including anchor Dunham Sports, several restaurants, Bath & Body Works and Payless Shoes, as well as non-retail tenants such as Cummins Inc. and a community theater.
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FairOaks Mall is zoned CR, commercial regional, which includes large retail and hospitals. The various proposed uses are either permitted or conditional in the CR zoning district.
For example, a community center is a permitted use, but an athletic complex and a conference center are conditional uses. Conditional uses are subject to the case-by-case approval of the Board of Zoning Appeals.
Current owner of the mall is New FairOaks Mall Owner LLC. The deal with the city was agreed to by a key company executive, Yeheskel Frankel of Lakewood, N.J. Frankel’s group bought the mall — which was in foreclosure — in January 2014 for $550,000, a fraction of the assessed value at the time.
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A list of active businesses in FairOaks Mall:
Bath & Body Works
BoRics
Carlos Pizza
Creative Threads
Cummins Inc.
Dunham’s Sports
Fun Times arcade
Harlequin Theatre
Mark Pi’s China Gate
Music & More
Nirvana (2 spaces)
Payless Shoes
Percenell Touch (kiosk)
Riviera Maya
Silky Nails
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Columbus officials plan to complete the purchase of the FairOaks Mall property on Dec. 14. There will be no formal meeting such as a traditional real estate closing of other types of real estate, city officials said. The purchase becomes official on that date.
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