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MALLS STRUGGLE WITH TOLEDO’S ECONOMIC DECLINE

By Anna Robaton

Southwyck is fighting back with a $20 million renovation, and a pledge from Dillard’s that it will remain at the mall.

When North Towne Square, Toledo, Ohio, opened its doors in 1980, the city was poised for growth. Instead, Toledo actually saw its population decline. Today the mall is hobbling along, with all its anchors dark.

North Towne isn’t the only aging Toledo mall in rough shape. It is one of several that have been choked in recent years by flat to declining populations, competition from shopping centers in faster-growing locales and retail consolidation.

Now Southwyck, a 30-year-old mall on the south side of Toledo, may have a new lease on life thanks to renewed interest on the part of department stores and to an anticipated, long overdue renovation by its owner, Sherman W. Dreiseszun, president of Dreiseszun and Morgan, Overland Park, Kan.

But the future of North Towne and Woodville Mall, which reportedly have been plagued with double-digit vacancy rates in recent years, remains uncertain. Both are owned by Simon Property Group, Indianapolis, which developed the 748,000-square-foot North Towne in 1980 and took over Woodville through a 1996 merger with DeBartolo Realty Corp. DeBartolo developed the 773,000-square-foot Woodville in 1969.

The malls were built to take advantage of population growth in the surrounding neighborhoods, but that growth fell far short of expectations. What growth has taken place in Toledo has been largely concentrated away from North Towne and Woodville on the metro area’s west side, solidifying the position of two competing properties: Westgate Village Shopping Center and Westfield Shoppingtown Franklin Park.

Like other Midwest cities, Toledo, the sixth-largest city in Ohio, has seen its population dwindle in recent years as residents have moved to the suburbs in search of better schools and newer housing and roads. Toledo’s three-county metropolitan area saw its population decline 0.4 percent between 1980 and 1990. The population is expected to grow 2.1 percent for the 10-year period ending 2015, according to the city.

“It’s just indicative of communities this size in the Midwest,” said David P. Long, an associate in the retail advisory services group of CB Richard Ellis Reichle Kline in the Toledo suburb of Holland. “The city has had negative population growth.”

In July Toledo’s unemployment rate was 9.9 percent, four percentage points above the U.S. average. City officials say the area’s economy is heavily dependent on the auto industry; they are working to diversify its commercial base by helping to bolster such fledgling sectors as medical technology (the city recently built a technology park near one of its major hospitals). Officials have also made some strides recently in stimulating residential development downtown along the Maumee River, which has brought some new retailing to the area.

But retail consolidation hasn’t helped struggling malls. North Towne lost two of its anchors as a result of the bankruptcy filings of Montgomery Ward and Elder-Beerman, and Dillard’s has shuttered its store there. Woodville is anchored by Sears (which is expected to fill a vacant anchor space at nearby Southwyck), Elder-Beerman and Anderson’s, a regional general merchandise chain. Simon declined to discuss the centers.

“Historically, you’ve had too many malls, and the trade area wasn’t able to support them,” said Long. “As changes in consumer spending patterns occurred, there [came to be] fewer reasons to go to these malls.”

Woodville Mall was built in 1969 in anticipation of a population boom in surrounding neighborhoods that never materialized.

After years of losing market share, 850,000-square-foot Southwyck is fighting back. Things began to look up in June when Little Rock, Ark.-based Dillard’s, an equity partner in the mall, announced that it would not abandon Southwyck in favor of a 1.2 million-square-foot mall planned by Chicago-based General Growth Properties for the fast-growing suburb of Maumee. Dillard’s, which has two of the three anchor spaces at Southwyck, plans to close its home store there and consolidate into one, making room for a new anchor.

Southwyck’s owner has proposed a $20 million renovation that calls for remodeling 148,000 square feet of existing tenant space, expanding the mall by 91,000 square feet and adding a new 68,000-square-foot food court and a 20,000-square-foot restaurant, according to the city. Dreiseszun declined to talk about his plans for the property.

In addition, Sears may open a store there, spending $10 million to renovate an anchor space formerly occupied by Montgomery Ward, city officials say.

That plan is raising questions over whether the Hoffman Estates, Ill.-based department store chain will also go ahead with plans to open at General Growth’s project, called The Mall at Fallen Timbers. The General Growth project was expected to deal a fatal blow to Southwyck, but the development’s timetable is unclear now that a second anchor tenant may back out. At press time a Sears spokeswoman said the company had not decided between the two projects. General Growth declined to comment.

In any case, Southwyck’s comeback is hardly a sure thing. Both the mall owner and Sears are waiting to see whether the city gives them the tax breaks it has proposed as incentives to reinvigorate the mall. Toledo’s Industrial Development Council was scheduled to vote on the proposed tax abatements in September, with the city council expected to vote on the matter afterward.

Dreiseszun and Sears “believe they can revive the center and at the same time revive the neighborhood” around it, said John Scherburne, Toledo’s commissioner of economic development. “It is our intent that if we accomplish one, the other will come with it.”

In its negotiations with Sears, the city has sought assurances that the retailer won’t close its store at Westgate Village if it opens at Southwyck. It’s easy to see why Toledo is worried about the fate of Westgate Village as well.

Westgate Village, an open-air center privately owned by Chicago’s Abbell family, and the neighboring Westfield Shoppingtown Franklin Park are at the heart of the most successful retail hub in the market, according to Long. Both malls have sales of almost $300 per square foot, thanks in part to the fact that almost a third of the trade area’s population is located within a 10-minute drive.

What’s more, Franklin Park’s new owner, Los Angeles-based Westfield America, isn’t going to let Southwyck lure back shoppers without a fight. Westfield acquired Franklin Park, considered Toledo’s premier regional mall, in May when it bought The Rouse Co.’s remaining 50 percent interest for $21 million and the assumption of debt on the property. Though Westfield declined to discuss specific plans for the mall, the company has traditionally acquired properties with redevelopment potential.

Nonetheless, Southwyck’s future appears brighter than it did only a year ago, and its location gives it a leg up over beleaguered North Towne and Woodville. The mall is situated in a dense residential area with good highway access. It is also adjacent to a mixed-use development that draws almost 30,000 office workers a day.

“After Southwyck is redeveloped and General Growth opens [its mall], those will be the final nails in the coffin of North Towne and Woodville,” said Long.

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