Recent news that ownership of Concord Mall is changing hands has reignited speculation about the fate of the mall that’s been a mainstay on Concord Pike in North Wilmington since the late 1960s.
Contributor Eileen Dallabrida has reported on the state of malls in the First State over the past few years. This week, she digs deeper into Concord Mall’s ownership change and what it could mean.
Two years after announcing an ambitious makeover, the owners of Concord Mall gave up on the struggling retail center as it headed towards foreclosure.
The new owner, an investment firm that specializes in troubled malls, bought the mall’s mortgage from John Hancock Life Insurance Co., its former holder. Namdar Realty Group is on a buying spree, adding seven malls to its portfolio in 2019. On the flip side, the Long Island, New York-based company is selling Voorhees Town Center in southern New Jersey to a developer after the township threatened to condemn parts of the complex.
Concord Mall’s longtime owner, Wilmington-based Allied Properties, retains ownership of the big box complex that adjoins the mall, home to Best Buy, Ulta and Sprouts Farmers Market, an organic grocer that moved in after Barnes & Noble relocated to a smaller storefront a mile south on Route 202.
Jim Oeste, Allied’s vice president of retail, said the company was faced with a decision of whether to reinvest in Concord or divest itself of the 800,000-square-foot center built in 1968. In 2017, Allied announced plans to transform the mall into a mixed-use retail and entertainment center. Founded by developer Frank Acierno, Allied is a privately held, family-owned company and owns and manages more than 6 million square feet of retail space, including the successful Christiana Fashion Center.
Neither Namdar nor Allied responded to request for comment on what shoppers might expect in coming months at the mall. But retail watchers said Concord is part of a growing trend in which mall owners are opting to cut bait rather than gamble on luring new customers with expensive makeovers.
‘Extreme hardship’ in retail
“It’s a harbinger of things to come because of the extreme hardship that is being suffered by retail,” says Victor Sahn, a lawyer who has represented dozens of retailers who have gone out of business or dramatically downsized. “The mall is still the mall but its value has declined based on lower revenues due to vacancies.”
That’s creating opportunity for new owners, who make money by collecting rents from tenants, selling off parcels of mall land, and waiting for new developers to pay a premium for the potential in the site.
“A lender does not want to foreclose, own and operate a mall,” Sahn says. “The lender wants to recoup as much of its investment as possible and move on.”
Namdar bought Voorhees Town Center in 2015 for $13.4 million. The seller, Pennsylvania Real Estate Investment Trust (PREIT), paid $18.3 million in 2003 for what was then the failing Echelon Mall and poured $80 million into transforming the property into a mixed-used development that included retail, condominiums, office space and recreation.
But the center suffered from poor access from major roads and didn’t catch on with consumers, even after Voorhees moved its government offices into the mall to increase foot traffic. The relationship between Namdar and the township quickly soured, with Voorhees accusing the mall owner of failing to repair escalators, maintain security and replace light bulbs.
It’s a common lament at Namdar properties. In a Florida lawsuit, one tenant called Namdar “a slumlord.” In North Carolina, sewage from a blocked pipe backed up into a mall theater.
Ultimately, Voorhees declared the mall an Improvement District and dinged Namdar with assessments. Namdar agreed to sell the property so a developer, Brandywine Financial, can build homes, a Dave & Buster-style entertainment center and a cluster of microbreweries.
“The township views this as a step forward and a new beginning for the Voorhees Town Center,” Mayor Michael Mignogna said in a statement announcing the deal in 2019. “(The) Existing owner has not been a good partner with the township and has not been proactive in maintaining and promoting the property. Brandywine Financial will soon become the new owner and intends to invest $15 million into the property. For all intents and purposes, they will have a ‘blank canvas’ to paint.”
An afternoon at the mall
On a recent afternoon at Concord Mall, foot traffic was light. There were a handful of shoppers at Sears, which survived the fading retail giant’s latest round of store closures. With few customers, Macy’s employees chatted among themselves. At the north end of the mall, Boscov’s anchor store was bustling.
A few indies—a shoe repair shop and a kiosk that replaces watch batteries—attracted short lines. Store employees on break and shoppers queued up at Chick-Fil-A.
“I hope the new owner gets a decent food court because there are not enough places to get a quick bite,” one worker said. “I also hope they fix the roof because it leaks every time it rains.”
On this afternoon, the floors in the corridors in the main section of the mall were sparkling. A woman pushing a cart of cleaning supplies paused to wipe crumbs from a table.
Merchants and retail workers said Namdar fired Allied’s maintenance and security staffs and brought in their own teams. The mall information desk has been closed. A sign refers shoppers to an office down the corridor.
At AB Sports Cards, a longtime tenant, signs in the window promote the store’s closing sale, with 60 percent off sports memorabilia. A sign in the window of a shuttered Kitchen Kapers directs shoppers to the chain’s nearest location, in Paoli, Pennsylvania. Retro Fitness is vacating 13,000 square feet.
The big question is the mall’s struggling Sears, the last surviving bastion of the brand in Delaware.
“When you look at Concord Mall, I suspect Sears is the last straw,” Sahn says.
Jim Savard, executive vice president of Metro Commercial, a retail broker in Philadelphia, says finding a single retail tenant to fill an anchor is a difficult task. But malls are succeeding in meeting the challenge in other ways, such as renting or selling space to health systems.
“At Moorestown Mall in New Jersey, they took the Macy’s box and divided it into Five Below and HomeSense,” he says. “It’s a very similar situation, with Moorestown sitting in the shadow of Cherry Hill Mall, like Concord sits in the shadow of Christiana Mall.”
The A team in C malls
Christiana is a Class A mall, defined as retail sales of more than $500 per square foot, according to Pacific Retail Capital Partners. Namdar’s sweet spot is Class C malls, with sales of less than $300 per square feet. It’s a growing sector. Of the 400 malls currently operating in the United States, about 30 percent are Class A, according to a report by the commercial real estate firm CBRE.
Shlomo Chopp is the founder of Anchor Shops by ShopFulfill, a new concept in which online retailers have a brick-and-mortar presence in malls. The first Anchor Shops will open in The Fashion District in Philadelphia.
He doesn’t have a deal with Namdar but he is familiar with the company and says there is a place for C malls in the marketplace.
“C malls often do well because the owners don’t put in a lot of money and the tenants sell low-priced goods. Even with cheap rent, it’s worth their time to keep operating,” he says. “Namdar knows how to operate a C mall and how to do it properly.”
In only eight years, Namdar has amassed holdings of 137 malls and shopping centers. Low rent makes tenants less likely to bolt or squawk and also makes a spot in the mall more accessible to small, independent businesses.
An integral part of the formula is access to capital. Namco Realty Ltd. raises money by issuing bonds on the Tel Aviv Stock Exchange. Israel Discount Bank of New York was named as Namdar’s lender for a $16.5 million mortgage on the same day that Concord Mall’s mortgage was satisfied, according to Delaware Business Times. That’s a discount on the mall’s $18-million assessment on its 2019 New Castle County tax bill. Allied paid $80 million to buy the mall in 2000.
In addition to collecting rent, Namdar makes money selling off parcels and pieces of real estate. In 2014, the company paid $13 million for Regency Square in Jacksonville, Florida. A year later, Namdar sold the mall’s multiplex theater for $26.2 million. An empty Belk anchor garnered $7 million, sold to a large church.
Namdar and its affiliate, Mason Asset Management, also profit from quick flips. In 2012, the company bought Salisbury Mall in North Carolina out of foreclosure for $2.5 million. Less than two years later, Namdar sold most of the parcel to the county for $3.43 million so it could be converted into government offices, according to the Salisbury Post. The county also picked up the $1.3 million tab to replace the mall's leaky roof.
Concord Mall is not the only local retail center news
Wilmington-based Allied Retail Properties continues to develop other properties after giving up on ambitious plans to reinvent Concord Mall. The latest tenant at the company’s Christiana Fashion Center is Delaware’s second stand-alone branch of Chase Bank.
At Allied’s Christiana Town Center, Planet Fitness is filling a space vacated by Restoration Hardware Outlet. Urban Air Adventure Park, an indoor entertainment concept with a trampoline park, indoor coaster and obstacle courses, is expected to open in February.
Here’s other news on the retail front:
- Bose is closing all 119 of its high-end electronics store in North America, including its location at Christiana Mall. The company said most of its customers buy products online.
- Pier 1 has announced plans to shutter half its stores. The seller of casual home goods operates four stores in Delaware, at Allied’s Concord Gallery in North Wilmington, as well as Christiana, Dover and Rehoboth Beach. The company has not yet revealed which stores are on the chopping block.
- A.C. Moore will close all 145 of its stores. About 40 A.C. Moore stores will be acquired by arts-and-crafts rival Michael’s, which also is buying A.C. Moore’s distribution center. A.C. Moore has locations on Kirkwood Highway in Wilmington and Dupont Highway in Dover.
- Adidas is going greener. The sportswear giant will manufacture at least 15 million and 20 million pairs of shoes using ocean plastic this year.
- Two Stones Pub, a six-restaurant gastropub concept, opened a new location near the I-95 exit in Newark.
- Walmart is paying more, raising its hourly minimum wage from $11 to $12 in 500 stores. It’s part of a pilot to retain employees and broaden the pathway to career advancement.
- The Green Room, long a bastion of upscale dining at Hotel du Pont in downtown Wilmington, will reopen this spring as Le Cavalier at the Green Room. (Le Cavalier is a French term for a noble horseman trained in arms.) The new concept will be a more relaxed brasserie.
This story has been updated to reflect that the Chase Bank branch at the Christiana Fashion Center is its second in Delaware. It previously stated it was the first. Delaware Public Media apologizes for the error.