Mall adjusts to changing landscape; aims for 70 percent retail in 3-5 years
The ever-growing market share brick-and-mortar retailers are losing to online competitors demands agility from lessors of commercial space, the head of the Houston-based shopping center acquisition and development concern that owns the Hot Springs Mall said Wednesday at the Arlington Resort Hotel & Spa.
Andy Weiner, president and CEO of Rockstep Capital Opportunity Fund, told the Hot Springs National Park Rotary Club the mall can adapt, offering the Vicksburg Mall in Mississippi as an example of the strategy his company has employed to maintain occupancy rates as online competition continues to disrupt traditional retail.
Rockstep has filled the void with non-retail tenants, such as Alcorn State University, which has a satellite campus at the mall, and an upmarket bowling alley. He said the federal government will become a tenant this fall, when the Social Security Administration’s local office moves to the mall.
“Instead of 100-percent retail, it’s 70-percent retail or 60-percent retail and 40-percent other,” said Weiner, whose company owns or has acquired 6 million square feet of retail space in 10 states, including the Pines Mall in Pine Bluff, which, according to Jefferson County property records, he sold for $4.2 million in January 2015, a more than 300-percent return on the January 2012 acquisition price. “It becomes a mixed-use type of facility — educational, corporate office, medical office, back office, fitness, health and wellness, hospitality — all of these alternative uses.
“That’s how we envision the long term for the Hot Springs Mall. Instead of 100-percent retail, we see it being 70-percent retail in three to five years.”
Weiner said the mall is not the high-rent district it’s perceived to be, explaining the below-market price of $5.5 million the property was acquired for at an August 2015 foreclosure auction allows Rockstep to offer reasonable lease terms.
“Normally, the mall has a reputation of being the higher-end player in the market,” he said. “But because we bought it at the right price, we’re actually the low-rent
provider in the market. We’ve become the low-cost provider with a great location, great signage and great parking.”
Weiner said uncertainty proceeding from what he called the Amazon risk, or the disruption to the traditional retail sector the online retail giant has created, has made malls rethink their business plans. He said courting Amazon-invulnerable tenants such as restaurants, grocery stores, service and entertainment providers and off-price retailers is beneficial to the bottom line, as they are more likely to renew their leases and provide steady rent incomes attractive to creditors.
“We’re no longer in the shopping center business,” Weiner said. “We’re in the real estate business. You don’t think about shopping the way you used to or about going to the mall like you did 20 or 30 years ago. Our goal is to have at least four restaurants in the next four years. Two of them in the parking field, and two with patios at the left and right side of the entrance.”
The upending of the retail sector notwithstanding, Weiner said malls in communities such as Hot Springs remain a going concern, providing a rate of return worth the asset price. Garland County’s contract appraisal service said Rockstep netted $1.4 million from the Hot Springs Mall in 2016.
“Our mission as a company is to make small town America better, by bringing capital and expertise to assets that are important to a community,” he said. “You can purchase a quality cash flow in a town like Hot Springs or smaller community at dramatically cheaper prices than a major metro like Dallas, Atlanta or Chicago.”