Experts: Milford, Post mall officials need to compromise
Enclosed shopping malls are being hit with a onetwo punch: The effects a pandemic and its associated restrictions have had on foot traffic at the retail centers, and consumers’ increased comfort level with shopping online.
That is the business climate in which Dallasbased Centennial Real Estate, which owns Milford’s Connecticut Post Mall, and other mall owners are operating. And each mall owner has a different idea on how to increase foot traffic.
And as major national retailers fall by the wayside on an almost weekly basis, either by going out of business entirely or by filing for Chapter 11 bankruptcy protection, the job of filling vacant mall spaces becomes harder and harder.
The Milford Planning and Zoning Commission earlier this month rejected Centennial’s request for approvals needed to build a four-story luxury apartments complex at the mall, on six acres surrounding the former Sears Auto Center site. It would have been the first move in a multi-phase makeover to convert the enclosed mall into a mixed-use complex, something the company already is doing in Southern California and suburban Chicago.
Centennial proposed spending $60 million to $70 million to build the luxury apartments, the first step in a makeover of the mall that would have gone on for years. The proposal called for 135 one-bedroom units, 135 two-bedroom units and 30 three-bedroom units.
PZC members voted 5-3 earlier this month to reject a zone change Centennial had requested. Board Chairman Jim Quish was among those voting against, saying he would like to see the company come forward with “an application with a completed master plan and a timeline, with potentially developers for the residential.”
Now, Centennial executives are keeping their next move closely guarded.
“Centennial is disappointed that our proposal did not receive the support of the Milford Planning & Zoning Board,” Jon Meshel, the company’s vice president for development said in a written statement. “We will continue evaluating our options for the property.”
Burt Flickinger, managing director of the Strategic Resource Group, a New York City-based business that does consulting work for retailers, believes the Milford PZC miscalculated the current retail climate.
“By not agreeing to what they (Centennial) proposed, they are jeopardizing their whole tax base and future school budgets,” he said. “If they had agreed to it, it would produce foot traffic for the mall, which would translate into more tax revenue.”
Efforts to determine the future viability of the Connecticut Post Mall are being played out against a backdrop that looks bleak for enclosed shopping malls. About 300 enclosed malls around the country have closed in the past decade, Flickinger said, and another 500 are expected to close in the decade ahead, a decline that is being expedited by the economic impact of the coronavirus pandemic.
Donald Klepper-Smith, chief economist and director of research for New Haven-based DataCore Partners, said the pandemic has “done far more economic damage than people realize” to state and municipal coffers.
“Tax revenues have seen a precipitous drop, in some cases right off a cliff, and the budget pressures that come with that are going to be with us for a while,” Klepper-Smith said. “Every dollar counts, and so all (development) projects need to be looked at with a scrutinizing eye. And there has to be a willingness to bend with the new economic normal.”
Brian Marks, senior lecturer in the economics and business analytics department at the University of New Haven’s Pompea College of Business, said malls — and the retail sector as a whole — already were seeing profound structural changes in the two years prior to COVID-19 hitting the United States.
“This public health crisis has only accelerated that weakness,” Marks said. “We’ve now seen 29 major retail bankruptcies and many of them are mall anchors. So the mall owners have to do something to transform the use of their property and any municipality that thinks malls aren’t going to change dramatically is on a fool’s errand.”
When a business files for a federal Chapter 11 bankruptcy, it is an effort to restructure debt while keeping creditors at bay. Part of the process as it relates to retailers, according to Marks, usually involves “looking to get out of lease liabilities.” Because of this, he said “it is clear the traditional mall is arguably a thing of the past.”
Marks said it is possible the public positions Centennial and Milford officials have staked out could be a prelude to a negotiation that will result in a compromise acceptable to both parties.
“In some ways, it could be viewed as a game of brinkmanship,” he said. “Centennial could be viewing what happened with the PZC as a way of getting an idea of what the parameters might be if they enter into negotiations.”
Substantive negotiations between the two parties, if handled properly, might lead to a better outcome than what the city now has with the mall while preserving tax revenue, according to Marks.
“It could create a (retail) center that has much more of a New England-y feel than what they have now, which is a property filled with parking areas and lots of cement,” he said. “The town needs to start thinking how it wants the retail sector in town to reposition itself because the smaller retail business are going to feel that pressure (that is being felt by the mall), too. There needs to be a cohesive strategic approach regarding what will retail space and operations in town look like.”
Klepper-Smith said Milford officials need to view reaching some kind of compromise with Centennial as “a quality of life issue.”
“It gets to the issue of balance in your grand list and how important it is to go the extra mile to help ease the burden on taxpayers,” he said.
Other communities and mall owners around the state are wrestling with similar dilemmas.
Right now, the only types of enclosed malls that have opened in the past year or two are high-end megamalls such as the 3-millionsquare-foot American Dream Mall that opened last October in East Rutherford. N.J., or smaller high-end retail centers such as the SoNo Collection, a 700,000-square-foot mall located off Interstate 95 in Norwalk.
Flickinger did consulting work on the American Dream Mall, which, in addition to vast amounts of retail space, has an indoor amusement park, a water park and an indoor ski slope to attract crowds. But even with all of those unique attractions to lure people to the mall, he said, “American Dream is going to have a real challenge being viable the way things are now.”
American Dream opened last fall, but was closed in March 2020 along with other businesses to prevent the spread of COVID-19. When it reopened Oct. 1, there were only 33 stores open, according to Forbes magazine, in a mall designed to accommodate 350.
October is the one-year anniversary of the opening of the SoNo Collection and already the upscale mall has begun drawing retailers away from Stamford Town Center, located just eight miles away.
Stamford Town Center operates with about 90 tenants. But even with the newcomers and anchor stores, there are more than 20 vacant storefronts and restaurant spaces in the downtown Stamford property.
Several of those vacancies were caused by the departure of retailers including Apple Store and Swedish fast-fashion specialist H&M and British shoe seller Clarks from Stamford Town Center in favor of having stores in the SoNo Collection.
Elsewhere in Connecticut, the former Enfield Square Mall is in the early phases of a makeover. Zoning officials in Enfield earlier this year approved a proposal by two Long Island companies, Namdar Reality Group and Mason Asset Management, to turn eight parcels of land that the mall was on before into 13.
The mall sold for $82.03 million in 2006, and then sold for $11.39 million last year, an 86 percent depreciation in value over 14 years, according to a report prepared by Gorman + York, an East Hartford-based real estate advisory consultant. The mall’s assessed value dropped by 50 percent in two years.
The Enfield mall’s owners, looking to fill vacant storefronts, quickly announced they were letting Enfield’s New Life Church use one of the empty retail spaces.
Namdar Reality Group and Mason Asset Management acquired the former Meriden Westfield Mall last year from Unibail-Rodamco-Westfield. Thus far, the new owners haven’t revealed their plans to Meriden officials.
The Wall Street Journal reported in August that the nation’s largest mall operator, Indianapolis-based Simon Property Group, was negotiating with Amazon to turn vacant mall anchor locations at its enclosed malls into distribution centers. Simon owns the Crystal Mall in Waterford and Clinton Crossing Outlets here in Connecticut.
Marks said another potential use for empty space in malls is would be by colleges and universities. Two former Connecticut retail centers that were made over into institutions of higher learning are the former Hi-Ho Center in downtown Bridgeport, now home to Houstaonic Community College, and the former Chapel Square Mall in New Haven.
Housatonic made its move to the former mall in January 1997 from its previous location in the Singer Metrics building in Bridgeport. The mall space there became available when the mall went bankrupt in 1994 and the state took control of the property because it was owed millions of dollars in back taxes.
Gateway moved into the former Macy’s location that was part of the Chapel Square Mall in 2012. Nearly a decade earlier, the portion of the mall that was located on the western edge of the New Haven Green was turned into luxury apartments.
Flickinger said the choices mall operators have if they want to remain viable are either developing mixed-use residential, which was part of Centennial’s long-term plan for Milford, or trying to develop develop the entire mall site for residential use, for which it is not currently zoned.
“With mixed-use, you have built-in clientele and you’re not scaring people away by having lots of store vacancies,” he said.
Marks said enclosed shopping malls won’t disappear entirely.
“We are social animals, we want to touch things and experience things,” he said. “But the longer this (COVID-19) goes on, customers will continue to become more comfortable shopping online. We will see a return to bricks-andmortar stores, but not to the extent of the way things were pre-COVID.”