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Nebraska center finds new life after Wal-Mart

By John Dube

With its powerful draw of discount-minded shoppers, Wal-Mart is a tough tenant to lose, but Hilltop Mall in Kearney, Neb., is finding that there is life after the retail giant.

Wal-Mart, one of the three original anchors at Hilltop Mall in 1984, pulled out for larger quarters in 1995. But it didn't go far. The discount giant opened a SuperCenter, which combines general merchandise and supermarket retailing, right across the street from Hilltop Mall.

Hilltop Mall replaced Wal-Mart with an expanded Herberger's.

That is one reason the 267,069-square-foot Hilltop Mall has still managed to grow its sales steadily in the four years since the loss of Wal-Mart, according to the mall's managers. A concerted effort to update the center's retail mix and appearance at the same time was the other significant factor.

"Traffic patterns in this scenario did not change; in fact, they've gotten stronger," said Bob Slechta, senior vice president of Dial Properties Co., the management and leasing arm of the Dial Cos., Omaha, Neb. Hilltop is owned by a partnership made up of principals within the Dial Cos., which owns and manages 5 million square feet of retail property throughout the Midwest.

"This could be a completely unique situation compared to other shopping centers that have gone through something similar, but the Dial Cos.' experience is that this has become a great opportunity for new growth," said Slechta.

"If Wal-Mart relocated to another part of town, it might have been different; but if they had to move this was the best option," he added.

Hilltop benefits from Wal-Mart's presence, just as Wal-Mart draws customers from the center.

"We see lots of customers walking from their parking lot to ours and vice versa. So it's really like we've doubled the size of our shopping center."

The reason for Slechta's upbeat assessment has a lot to do with Hilltop's location in an agricultural trade area. The mall draws traffic from the town's local university and medical community, but Hilltop also gets a significant portion of its traffic from a wide geographical area -- 100 miles to the north and west.

A discounter such as Wal-Mart definitely has an appeal to an agricultural population. But anyone traveling that far to shop probably has more than one destination in mind.

"I think Kearney is more of a destination for most of these people; I don't think they're saying, let's jump in the car and go to Wal-Mart," said Teresa Ibach, manager of Hilltop Mall. "When you come from that far, we all share in that shopping trip as a destination."

Consequently, since the departure of Wal-Mart, the mall has maintained steady sales growth. The mall's two anchors -- JC Penney and Herberger's -- and its other 46 tenants have watched their average sales per square foot increase from about $210 at the time of Wal-Mart's departure to about $240 today.

The exception has been the mall's food business, which slipped for a period in the wake of the Wal-Mart departure before rebounding.

But Wal-Mart alone was not responsible for the downturn in food sales, Slechta said. The area around the mall is still a growing retail destination; the new retail stores have been accompanied by new restaurants, which have definitely had a competitive impact.

Wal-Mart, which had occupied 87,375 square feet at Hilltop Mall, is a key part of Kearney's retail growth, but is not the only such example. Fortunately for the center, Herberger's also was looking to expand beyond its 37,000 square feet of space. The vacated Wal-Mart wing fit the bill. Herberger's moved in, doubling its space soon after Wal-Mart's departure.

"Kearney is an excellent market for us," said Gary Pralle, senior vice president of stores for Herberger's. "This store steadily has had our highest per-square-foot sales of any of our locations." There may have been a little trepidation at first about the loss of Wal-Mart, but those concerns did not last long, he said.

"It never really materialized into a problem. We had our grand opening in October, and every month since we've exceeded our plans. We consider ourselves to be a pretty strong anchor, too," said Pralle.

The site that Herberger's vacated will soon be occupied, as well. Dial is close to signing an agreement with a new tenant, which is expected to be announced shortly, said Slechta.

The expanded Herberger's took advantage of its new space to expand its selection of upper-end apparel, cosmetics and accessories. Herberger's presence has helped the mall attract a slightly different tenant mix, as more apparel stores and other traditional mall tenants -- formerly hesitant to locate near a discount store -- have become interested in locating throughout the mall.

Adjusting the tenant mix and upgrading the appearance of many of the stores has been another major key to Hilltop's success after Wal-Mart moved. The discounter left at about the time of the mall's 10th anniversary, when 22 of the leases were up for renewal. A mass exodus could have been devastating, but 20 of the stores entered into new contracts with Hilltop.

"I thought that showed a lot of confidence in the market and in our game plan for the shopping center," said Slechta.

"Many of them expanded or remodeled their look. That's a key any time you lose a store like Wal-Mart. It depends on everyone making sure they're getting smarter and don't just sit back and rely on that traffic. Our tenants did that."

Retailers that have updated their looks include: Maurices, Tradehome Shoes, Seifert's and the Buckle. New stores in Hilltop Mall include: Golden Corral, Bath & Body Works, CR Toys and Heirloom Gifts.

The mall also recently upgraded its public drinking fountains and entrance doors to meet Americans with Disabilities Act requirements.

Hilltop today

Ninety-six percent occupied, Hilltop Mall today is well-positioned and is holding its own against the competition, according to Slechta. Hilltop's chief rival is the 538,000-square-foot Conestoga Mall -- owned by The Richard E. Jacobs Group, Cleveland -- in Grand Island, Neb., about 45 miles east of Kearney.

Kearney's current business climate has helped.

The town has a population of 27,314, while the 45-mile radius around it has a population of 81,602. Sales growth in Kearney has been boosted by a steadily growing mean household income, currently estimated at $52,646. Kearney's sales growth has been anywhere from 6% to 12% for much of the '90s, climbing from $325 million in 1995 to $344 million in 1996.

With a bright outlook for continued retail growth in Kearney, there's no reason Hilltop cannot continue to grow, according to Slechta. Changes always result in another generation of retailer ready to come in if you are aggressive and seize the opportunity, he said.

"If you have a good product and business plan, you can continue to function effectively as long as you don't sit back complacently," said Slechta.

"Our stores have become very aggressive. We're aggressively looking forward to more opportunities for growth."