Even as the owners of Prescott Gateway Mall (PGM) relist the property following failure to close escrow June 30 with the winning bidder in a $10 million offer from an April auction, potential tenants pursue leasing opportunities and various existing merchants operate with reduced staff and hours.
New ownership “is still up in the air,” according to Katie Inman, senior sales executive with auction house Ten-X Commercial. “I can’t disclose exactly what is happening or happened with the property. We are actually taking offers and looking at some backup plans right now. We have other people interested, so it will not sit there, for sure.”
Ten-X Commercial conducted the auction for Dallas-based Tabani Group, which has managed the mall since its $16.3 million purchase of the property in November 2013.
As real estate professionals can attest, transactions fall out for any number of reasons, including financing, inspections, concessions and similar due diligence. When asked about the Ten-X Commercial track record for closing sales from its auctions, Inman said: “We have a 98 percent success rate of closing within 30 to 45 days. It is a rarity that this would happen.”
The listing now on the Ten-X Commercial website is presented under “Offer Select,” whereby the seller discloses terms under which prospective buyers create offers, Inman explained. “Seller Guidance” for those new PGM offers specifies a price of $13 million, 30 days diligence, 30 days closing, and a $250,000 deposit. Property details outline 318,503 rentable square feet on 37.92 acres with more than 1,700 parking spaces, an occupancy rate of 67.1 percent, and an in-place Net Operating Income of $1.7million.
PGM merchants historically have remained optimistic that traffic, sales and margins would improve under various ownerships, including Westcor and Macerich. Several stated that they have been “barely making it,” experiencing flat sales for years, or taking outside jobs to supplement income. They lamented recent vacancies, loss of what most recently was rumored to be a new owner familiar with the local market, and the lack of shoppers.
Seven parcels comprise the Tabani Group’s current PGM holdings, Yavapai County records show. This follows selloff in February 2014 of the 7,193-square-foot Texas Roadhouse restaurant on 1.11 acres for $1.65 million.
Another 1.11-acre parcel, located at 3410 Gateway Blvd, was sold by Bullwhacker Associates Limited Partnership for $220,000 in May 2017. That site will be the new home of Wildflower Bread Company, which has announced plans for 2018 to relocate from its current restaurant at the heart of the outdoor segment of the mall.
Anchors Dillard’s, JC Penney and Sears have owned their parcels since the mall’s inception, and the stand-alone space, which formerly housed The RoomStore also remains privately held. Sears’ real estate was transferred in July 2015 to Seritage Growth Properties, a spinoff of Sears Holdings.
The downward trend at Prescott Gateway Mall has become more of an issue over time, as tenants have retired, gone out of business or chosen to relocate within the Quad Cities area.
“I have nothing negative to say about Tabani,” said Mark DeRosa, manager of The Games People Play and Nate’s Arcade storefronts. “They have been very fair and flexible. My beef is that they have brought us no new merchants in four years.”
DeRosa, who describes himself as a very positive person, said that when he has spoken with PGM staff, they “seem like they want to do good, but we have lost, lost, lost [merchants].” Some of those tenants, he suggested, did not have a “high profile, but made money.”
The success of any mall ownership in attracting a high-volume shopping base fuels margins for merchants and corporate offices. Foot traffic is the lifeblood of retail centers the world over. Shoppers must not only show up for whatever services, merchandise and special events draw them to the center, they also must rack up sales in merchants’ point of sale systems.
“All malls across the country are struggling because of the increased presence, ease and affordability of online shopping,” explained Nancy Jauregui, owner of Grand Canyon Financial Advisors. Jauregui tracks the retail industry for investment purposes.
“Within the Prescott Gateway Mall, we have seen many businesses come and go,” she continued. “In the big picture, retail will make a comeback. Eventually the novelty of the ‘click and ship’ will be reduced by the want to have ‘the experience’ of going to the store, touching the material, trying on shoes, [and] overall, determining if the product is right for consumers in that very moment. People will find that they will be missing that ‘experience’ with online shopping.”
Technology innovations are changing the face of brick and mortar retail, Jauregui affirmed. “To many retailers, it has been devastating. Many malls across America have been literally abandoned and are desolate. Once a mall’s anchor stores leave, it is not long until the interior stores, which are on a much smaller rent-per-square-foot scale, begin to close. The small stores collectively cannot help the entire mall survive.”
In many of those declining retail locations, she noted, developers have been “coming in and transforming the closed anchor locations into medical facilities, restaurants and schools, only to name a few recent transformations.”
Rumors abound as to which, if any, such opportunities might be ahead for PGM once an anticipated sale of the mall is completed. Currently, there are no stated intentions that any of the three anchor stores plan to leave.
On the contrary, JCPenney recently began selling major appliances and is constructing a Sephora cosmetic center. Sephora brands itself on its website as “a leading retailer of perfume and cosmetics stores in France.” A 10-year partnership with JCPenney presents its products in a smaller retail footprint across 590 U.S. locations through owner LVMH Moët Hennessy Louis Vuitton, “the world’s leading luxury goods group.”
A new Quad Cities venture looking at PGM is WingSpace, LLC, a co-working support community focusing on collaboration, accessibility and sustainability for independent workers, start-ups, freelancers, telecommuters, entrepreneurs, techies, non-profits and small businesses via an entrepreneurial campus and innovation center.
“We’re currently looking at locating WingSpace someplace in or around the Prescott Gateway Mall for several reasons,” explained Melanie Banayat, founder and CEO of WingSpace. “We figure it could become a solid anchor business for the mall, which has been struggling for years. That location would also allow easy access from Prescott, Prescott Valley and even Chino Valley residents. And one of the biggest attractions has to do with the fact the mall has plenty of free parking. After looking at several locations in the downtown Prescott area, we realized that parking [downtown] would be a real problem right from the get-go.”
Banayat also cited the central location between Prescott and Prescott Valley, and the four hotels, multiple restaurants, fitness center and significant nearby shopping as appealing opportunities for business partnerships.
“Having an anchor business like WingSpace located at the mall would bring traffic to the mall on a daily basis year-round, not just on the weekends, holidays and for specials events,” Banayat said. “That could be a real boost for the retail businesses and restaurants located in and around the mall.” QCBN
By Sue Marceau, QCBN
Photo by Sue Marceau