Waterford – Last Sunday, the interior of the Crystal Mall was almost as quiet and sparsely populated as the parking lot. Macy & # 39; s had recently announced that the mall would be closing and posters with 25%, 40%, 50%, sometimes 60% discounts were scattered around the store – and the sell-off wasn't due to start until the next day.
Families, couples, single shoppers, and the usual groups of high schoolers meandered through the mall looking for deals or, as some said, to avoid boredom.
Many stores in the mall have introduced limited, if not completely closed, opening hours since the beginning of the COVID-19 pandemic, putting the future of the mall in question.
Simon Property Group, which has owned the mall for decades, is in the process of transferring the mall's title back to a commercial mortgage trust and handing the keys over to lenders who extended a $ 95 million loan to in 2012 Melissa Che, Senior Director in the Commercial Mortgage-Backed Securities group of Fitch Ratings.
Che said Simon owed $ 83.9 million on the loan, which matures in June 2022.
Commercial mortgage-backed securities are essentially a pool of loans that are combined and sold to investors. Simon's Crystal Mall loan is backed by a 518,500 square foot portion of the 783,300 square foot mall. The space used by Sears, which closed in December 2018, is owned by Seritage Growth Properties. Simon requested "special servicing" on the loan in July, a sign that default is imminent, Moody's Investors Service reported in December.
The COVID-19 pandemic, which resulted in malls being temporarily closed across the country, only added to the already grim fate of the Crystal Mall. It thrived for a while after it opened in 1984 and was eventually anchored by Sears, Macy, JCPenney and Filene who took up the space now filled by Bed, Bath & Beyond and the Christmas Tree Shops. Over the years, the 2007-08 financial crisis, competition from nearby Waterford Commons and Walmart, and the public's switch to online shopping have put a heavy strain on malls' traffic.
"I come here maybe once a month," East Haddam's Maggie Padron said last Sunday as she was browsing Macy's. “Sometimes I go shopping or find a good deal and come back for something else and maybe come back a couple of times in a row when I need something. Some stores that we like or that kids like have disappeared since COVID started. "
Padron, who has been shopping the mall for about 15 years, mentioned the impact of online retailing on the pandemic as the mall's demise.
"I'm sad and a little bit crazy because it feels like Amazon is taking over everything," she said. "I like Amazon, don't get me wrong, we shop there. But at the same time, if I need something now – like yesterday, I needed a blanket for my bed, I threw mine out because it was torn, I pull it don't get out of the trash – stores cater to those with specific needs that require immediate attention. I want to stop Amazon and only shop mom and pop stores so they don't all run out. "
Alex Degunia from Waterford works for Forever 21 and would rather not lose this gig.
“When I saw Hollister closing without notice the other day, I was pretty upset about it. And now Macy! "Said Degunia." A lot of people have work here. I have another job, but it would stink to lose this one as it is difficult to find a job right now. "
Ledyard's Marie Nocera has held a variety of jobs at the Crystal Mall since it opened. She remembered how much busier – and better – the mall was in the 1980s and 1990s. However, everything is online now. I shop online, my husband is an Amazon buyer. "
"I'll be sad, Sears was my favorite place. I was an employee here for many years, now I'm half retired," she said. "But it's time, honestly."
The mall had a huge hit when Sears closed in December 2018. In March of last year, the mall's total occupancy was 63%, Fitch Ratings reported in November. Revenue from tenants less than 10,000 square feet had fallen to $ 297 per square foot in 2019, down from $ 310 in 2018 and $ 315 when the loan was issued. At a mall like the Crystal Mall, such tenants should see revenue of around $ 400 per square foot, according to Che of Fitch Ratings.
It is up to the specialist service provider, a third party, to develop a strategy for the settlement of Simon's Crystal Mall loan. This could include stabilizing or liquidating the property, whichever produces the greatest return on the confidence. The process could take years, Che said, and ultimately involve discussions with a developer or an official.
"We're modeling a pretty large oversize loss based on the metrics," she said. “There have been many distressed mall sales for pennies on the dollar. Some have been switched to mixed use – retail and multi-family houses (apartments) – colleges, universities, call centers, medical facilities. … when we think of these, it is after a developer finds them. "
The Enfield Square case
According to John Clapp, professor emeritus of real estate at the University of Connecticut, the Crystal Mall is likely to be sold to one or more buyers with a plan to convert it.
Clapp highlighted parallels between Crystal Mall and Northern Connecticut's Enfield Square Mall, which has been in trouble for years, losing anchors like Sears, JCPenney and Macy's in the process. In 2015, the property was selected as the site of the proposed casino by owning a shopping mall, which the Mashantucket Pequot and Mohegan tribes had set up in East Windsor. City officials later put the property up in an unsuccessful, long-term offer for Amazon's North American headquarters.
In 2016, J.P. Morgan Chase at Enfield Mall forfeited after his property defaulted on a loan. In December 2018, it was auctioned by Long Island-based Namdar Realty Group. The bid started at $ 3.8 million.
"The auction raised $ 10.85 million for a property that had sold 12 years earlier for $ 85 million," wrote Clapp and co-author Tingyu Zhou, then a professor at Concordia University 2019 article titled "Over Retailing and Store Closings – Trouble" Advance for Local Economies, Risk for the National Economy. "
The paper, which was researched and written more than a year before the COVID-19 pandemic, predicted that "a retail debacle will come … during the next economic downturn".
Since acquiring the Enfield Shopping Center, Namdar has subdivided the property and attempted to sell packages to shopping center tenants, including the single anchor store Target, which "did reasonably well" according to Lauren Whitten, Enfield's Director of Development Services.
The mall remains largely empty, however, and Namdar has yet to share the details of a plan for redevelopment, she said.
"It could be recreational or educational, and the recreational plan could include a senior living component," Whitten said. "But there were no details."
Clapp said the Crystal Mall, like the Enfield Shopping Center, could be a candidate for residential development due to its proximity to highways and rail transport. "It's a very short drive from Crystal Mall to the train station," he said. “It would be quite feasible to set up a bus connection to the train if it is a matter of high-density housing for workers. Young professionals who want to live there could get down to work. "
"I wonder if Pfizer might be interested," said Clapp.
Rob Brule, Waterford's First Selectman, said he and others in the city are aware of the mall's struggles and have been trying to plan for months. However, the lack of clarity about the ownership and future of the Crystal Mall makes this difficult.
Urban planner Abby Piersall said the city had reached out to her contacts at Simon and Seritage about the future of the mall. The city has not been notified of any official foreclosure.
"There was some limited conversation with Seritage about future development opportunities, but nothing specific at all. It was idea-based discussions about what could be allowed in the business district where the mall is located," said Piersall. “Simon, we haven't heard or had a face-to-face conversation about what this future plan would look like. If interest stems from another entity, we would need to contact that entity to have these conversations. "
"A Gateway to Waterford"
Piersall and Brule are optimistic about what the Crystal Mall could look like in the years to come. Both pointed out that the Hartford Healthcare facility, which will replace the former Toys R Us, is coming to town as an example of what Waterford can do with closed shop space. They expect a healthy interest in the Crystal Mall property from the developer community based on the location.
"Given the way in which it serves as both a gateway to Waterford and a regional amenity, it was incredibly important and a focal point for the city and region," said Piersall. "It could be the sweet spot of mixed-use housing, retail and services, trying to find the right balance that will elevate and expand the kinds of things that have historically been."
Both Brule and Piersall quickly find that they support all existing businesses in the city as long as they are in business. According to Piersall, closing the Crystal Mall could be an opportunity to transform the city of Waterford from the ground up. For example, one of her department's priorities is diversifying the city's housing options.
Brule has organized an advisory committee to strategize the Crystal Mall issue to benefit the region, not just Waterford.
"I felt it was important to organize a committee made up of some of our regional partners to get their thoughts and ideas on possible uses for this particular property," said Brule.
The committee consists so far of Piersall; Walton; City Attorney Rob Avena; State Representative Kathleen McCarty, R-Waterford; State Senator Paul Formica, R-East Lyme; Leader of the Eastern Connecticut Chamber of Commerce; the Southeastern Connecticut Enterprise Region; the Southeastern Connecticut Council of Governments; AdvanceCT and the State Department of Economic and Community Development.
Vacancy Harassment Act
When it comes to repurposing a mall, the trick is to pursue lasting solutions that require a thorough understanding of local needs, Clapp said. Retail stores can linger, backed by low rents and tax breaks, while empty malls can eventually go bad.
Clapp, in his 2019 paper, cited the case of the Regency Mall in Augusta, Georgia, "an early example of what 10% to 20% of US shopping districts could be ahead of us." The mall opened in 1978, faced direct competition from another mall, and lost its anchor stores over the next 20 years.
“Shortly after Montgomery Ward went bankrupt in 2001, most of the mall closed. Vandalism and fires broke out on the site and the surrounding neighborhood refused, ”the newspaper said. "Despite several efforts to find alternative uses, the location is largely empty to this day."
Clapp advocates the passing of a "law to impair the vacancy rate", according to which the owner of a large, vacant commercial space must sell or renovate it within a certain period of time, for example two to three years. In the absence of such a law, a crippled mall space could "hobble" for significant periods of time, affecting a community's tax base and ability to create jobs, he said.
Waterford chief financial officer Kim Allen and tax advisor Paige Walton said the city's tax base will not be impacted this fiscal year.
"Property will continue to be paid for in the coming year," said Allen. "I think personal property can have some impact when leaving stores, but I don't see any negative impact for the current fiscal year."
Walton and Allen said they are waiting for the situation to develop before assessing the tax base impact if property taxes cease to come in on the Crystal Mall location. The mall is the third largest taxpayer in Waterford.
"There is a vibrant economy in Waterford beyond the mall and I think it's important not to characterize the city as entirely dependent on that contributor to the tax base," Piersall said. "The city is working to partner with a variety of developers on a variety of properties to make up for a potential loss, but the sun doesn't rise and set at Crystal Mall."