Enclosed Malls Still Have Appeal
January 5, 2017 | By Brian J. Rogal
Original article published on GlobeSt.com
Malls like Colony Square in Zanesville, OH, may have gone out of fashion in core markets, but it still has strong sales growth and leasing momentum.
ZANESVILLE, OH—Time Equities Inc., a New York-based real estate firm, has just acquired Colony Square, a 422,881-square-foot enclosed regional mall located in Zanesville, OH, for $31.5 million. Boasting an occupancy rate of approximately 86% with 63 in-place tenants, the deal marks the firm’s largest retail purchase in the state.
Many investors believe enclosed malls are no longer relevant to the world of modern retail. But Time Equities has now bought five of these properties, frequently from REITs looking to sell off their non-core assets, and all located in secondary or tertiary markets. Company officials say others may be missing their importance and potential.
In small cities like Zanesville, which is 30 miles east of Columbus, “these malls are town centers, and they will continue to be town centers for a long time,” Ami Ziff, TEI’s director of national retail, tells GlobeSt.com. The same property might not work well anymore in dense urban areas where Amazon can complete quick deliveries, but “the right malls will continue to be around.”
There are few retail options between Zanesville and Columbus, he points out, and going east shoppers won’t find much until they hit Pittsburgh more than 60 miles away. “If you live in Zanesville, and you’ve got kids, what do you do on the weekends? The answer for a lot of people is to go see a movie at the mall. It’s a place where people connect.”
TEI also noticed that Colony Square had strong sales growth and a strong set of national tenants. “It’s a transaction that we’ve had our eye on for a while. It has a stable anchor and tremendous leasing momentum.” JC Penney, for example, occupies the most space, and other newer retailers, such as Planet Fitness, have recently opened up. Furthermore, T.J. Maxx and others have just signed leases, and these will soon push the center’s occupancy rate even higher.
Ziff says that TEI will spend several million dollars on upgrading the property. It will give some of the stores new exterior entrances, and the interior will get free WiFi, along with new, modern furnishings and art. “Other than that, the property is in great condition.”
And TEI is definitely hunting for other similar opportunities. There is a strong supply of sellers, Ziff says, and even though some hedge funds and pension funds have started looking into the space, “there is still a dearth of buyers.”
