With a sheriff's foreclosure auction on the horizon,
Southridge Mall in Greendale faces an uncertain future. But real estate experts point to national trends as an indicator of what could be next for southeastern Wisconsin's largest shopping mall.
Thanks to the rise of Amazon and e-commerce, regional malls across the country have suffered; property owners have been forced to adapt by downsizing retail space, attracting unique or experiential tenants, and adding a mix of uses such as office and residential.
Southridge, which was once anchored by five big-box retailers, has attempted to fill the vacant space with fresh tenants and attractions such as Dick’s Sporting Goods, Golf Galaxy, Round 1 Bowling, TJ Maxx and Sixty to Escape, which now occupy the former Sears building. Marcus Theatres opened its BistroPlex in 2017 on a leased portion of the mall’s parking lot.
But the challenges faced by Southridge and other malls were only exacerbated by the COVID-19 pandemic. After failing to make mortgage payments for the mall in May, June and July 2020, Simon Property Group (the owner of Southridge) defaulted on its loan. Its lender, JPMBB Commercial Mortgage Securities Trust 2014-C19, filed the foreclosure lawsuit in December 2020 in the Milwaukee County Circuit Court. Simon agreed to foreclosure earlier this month, with debt for Southridge topping $121.3 million and growing.
Whoever purchases Southridge Mall will likely be drawn to its land value more than anything else because, "The buildings aren't going to be all that usable," said a Milwaukee-area retail real estate broker who didn't want to be named. He anticipates the property will be broken up and redeveloped into residential and potentially some office.
Plans are already underway for a mixed-use development project at the former Boston Store site. Milwaukee-based
Barrett Lo Visionary Development will develop a residential complex with up to 790 apartment units and underground parking, as well as 50,000 square feet of retail and commercial space. The
project was approved last week by the Village of Greendale, which purchased the former department store site in July.
The village expects the project to "enhance and/or stabilize the tax base, improve the vitality of the Southridge Mall area, attract new residents, and build the village’s reputation and value," according to the news release.
But the move may have been made prematurely, said Nick Egelanian, president of Maryland-based consulting firm
SiteWorks Retail Real Estate Services. He said mall properties are most attractive when the buyer can purchase and control the whole site - in the case of Southridge, 100 acres of prime real estate.
He drew an analogy between a troubled regional mall and an old car that ends up in a junk yard. The junk yard operator (the buyer) sells parts of the car (outparcels and department store pads) for scrap value. The leftover metal is then crushed, melted down and used to create a new car.
"If you think about it in mall terms, all that's left at the end is the land," said Egelanian. "Now you have 100 acres of land, which if you control all of it, is an amazing piece of land ... but it's basically junk as it relates to its prior life as a mall," said Egelanian
.
"If the community is smart, it would have let it get all the way down to that junk yard level, that scrap level, so that they could now attract somebody to the whole 100-acre piece. That could be a new mixed-use center, a sports stadium, housing, an Amazon warehouse, hotels."
When the property is broken up "too early," he said, it could lose value and be seen as less attractive to potential buyers.
Still, the prospect of a new owner and new investment in the property is a reason for optimism, said
Mike Doble, owner of The Explorium Brewpub, which opened at Southridge Mall in 2017. Despite the mall's financial challenges, the location has been fruitful for Explorium, and the business has no plans of leaving.
"Traffic at the mall this holiday season has been as good if not better than 2019 ... my sales are if not equivalent probably a little better than 2019. We're doing really well," said Doble, who opened a second location near Milwaukee's Historic Third Ward last year.
Envisioning the future of Southridge, Doble hopes additional service and hospitality businesses and entertainment options will join the mix. He said retailers that sell shoes, athleticware and sporting good are also doing well.
"The kind of retailers that Amazon really can't or doesn't compete with -- the places where you want to go try on some jewelry or try on some shoes," he said.
What's more, Doble wouldn't mind the competition of another brewpub.
Egelanian said it's not surprising that a tenant like Explorium, a restaurant with its own exterior entrance, is seeing success in this post-pandemic climate. What really determines the health of a mall is the success of the tenants in the indoor part of the mall, particularly fashion retailers.
"They're probably having an OK year too, but the long term is not in their favor," he said.
Egelanian expects 80% of the remaining U.S. malls will fail in the next few years, ultimately leaving Milwaukee with Mayfair Mall in Wauwatosa as its one surviving regional mall. So eventually, Southridge will meet its fate, he says.
"If it had a future beyond that, it wouldn't have gone through this process in the first place," he said.
