City Hall

Slowly, Slowly, the City's Moving Closer to a Plan to "Stabilize" Southwest Center Mall

It was less than a month ago the city council's Economic Development Committee went behind closed doors with, among others, Office of Economic Development Director Karl Zavitkovsky to discuss what the what to do with Southwest Center Mall. They confabbed for more than an hour and emerged without ever mentioning what they'd decided to do with the beleaguered space formerly known as Red Bird. That's because they didn't decide anything.

But time is running out: The city's six-month lease (at $16,200 per) with an option to buy the vacant JCPenney space expires this month, and the city has no interest in letting it go only to watch owner Steve Rosenberg turn it over to a flea market, which was an option before the city stepped in back in December. And so, come Monday, the council committee and Zavitkovsky will once more meet in executive session to discuss what to do about Southwest Center.

Earlier today I noticed it's back on the agenda for first thing next week, so I called Zavitkovsky to ask about the outcome of last month's discussion and what he might talk about with the council on Monday. He was as open as he could be, considering the city's involved in negotiations not only with Rosenberg, the principal in Aspen Penneys, but also parties who may have an interest in taking over space. Says Zavitkovsky, "We may or may not facilitate the acquisition of that property."

On the other side, a Q&A with the city's EcoDev director about that "dead mall," as the Urban Land Institute referred to it in the study for which the city paid $120,000 out of the private-public partnership pot one year ago.

(Update at 8:26 a.m. Saturday: Before you read the Q&A, here's the briefing posted to the city's Web site late Friday. The takeaway: Since last month's meeting with the council, "New information has come to light impacting redevelopment opportunities at Southwest Center Mall which warrants considering a new approach for the City.")

Yet again you're meeting with the council to discuss the lease on JCPenney, which expires this month. Any idea what the plan will be moving forward?

Here's the deal: We have been in negotiations with Steve Rosenberg, who's the owner Penney's property, and we may or may not facilitate the acquisition of that property. We are looking at various options there that relate to the current owner of the mall space and the other anchor tenants. I think that what really came out of the ULI report was basically: Lock in your relationship with the major anchor tenants, look to control the former anchor spaces if at all possible, and try and create an operating partnership with the existing inline mall operators. So that's what we've done. Like any other negotiations they kinda go back and forth, and we'll be looking to recommend to the committee the best course of action within resources available to continue to stabilize the property.

That's what we're really looking to do: stabilize the property to give ourselves some time to put a longer-term plan in place and to eventually fill in the space. We've been very fortunate with the joint venture between [real estate brokerage company] Madison Partners and Jimmy Jazz, Cityview. They've been very proactive in terms of re-tenanting the mall space. They've reached out to the community, established a good relationship with the community, and they're working with Fiesta Mundo, which purchased the old Dillard's store.

As I recall from one of our previous conversations, you referred to Fiesta Mundo as a kind of Latino Dave & Buster's. When does it open?

They are planning on opening in September. They're in there and are going through the rehab of space now. And they will have some of the Dave & Buster's ingredients. They'll also have on the second floor what I would call an event area that will probably seat 3,000 or 4,000 -- kinda like the old Bronco Bowl. There's a lot of space there, and they envision a multi-activity, family-oriented and Latino-themed venue, but they're looking to draw from more than one ethnic group. The thing I feel good about is there seems to be an open dialogue between the Fiesta Mundo people and the Cityview people.

With regard to the Penney's space, it's a large space and not something that could be developed tomorrow unless there was a large user that occurred on the horizon and said, "I really want to use it." But going through the normal course of getting the existing space re-tenanted and moving sequentially, that's a way out. We've had continuing taks with Steve Rosenberg and weren't thrilled with the idea of a flea market renting that space, so at the time we said it's worth our while to take an option out for six months and think this through and find out what other options we've got and also have further conversations with Sears and Macy's and Burlington Coat and reassure them it's important for us the mall stabilize and we move forward with a plan. All of those things have gone along I would say as planned.

How much of Monday's meeting will yet again be behind closed doors?

Part of it will be in executive session, part of it will be open: We'll talk through most of the things we're talking about now. And where we will go into executive session is to get the green light on a course of negotiating action, and I don't expect we'll come out with a lot of specifics because we're in negotiations with a number of different parties, so it wouldn't serve any purpose to have specific numbers out there. But, you know, basically the people involved are the city, the owners of the inline mall space, the Penney's store and the major anchors.

The last time you guys were in exec session, you talked for an hour and didn't come back with any specifics. Will this be different?

We ran the committee through the alternatives and didn't really conclude anything. But the fact of the matter is we had agreed to take an option for six months and wanted to brief the committee on the different discussions we'd had with various people and the directions we'd wanted to go. What we're essentially doing is a gut check: Here's where we think we are, here's the direction we think we should be going, and here's what we want to do.

When do you expect a final announcement on what the city will do with the Penney's property?

Probably after the [council's summer] break. I'd hope we could have something August, September time frame. I don't expect any concrete specific resolution this month because there are too many parties. We won't have that locked down, and real estate negotiations can go back and forth. It's hard to predict. And you don't want to think just because you have an option on a property that it's anything too hard and fast, because somebody, should they want to, could come in with a more favorable offer, and the owner could find various ways to work with that. This is a very fluid situation, but I honestly feel that a lot of progress has been made since this time last year, when the ULI came in with their recommendations, and we've pretty much followed the path they suggested and caught a good break with the Fiesta Mundo deal. I also think Madison and Jimmy Jazz has been a very positive development. A lot of times, financial institutions who become owners are looking to liquidate. Not Madison.

So, have new tenants have come in?

Well, Foot Locker is there, and there are a couple of other urban shops Jimmy Jazz has brought in -- clothing, shoes. And they have done very well.

But not a lot. And people are going to ask: Where's the money coming from to pay for all this -- the study, the rent, whatever extension you seem to need going forward, whatever kind of partnership that may or may not emerge from this when all is said and done. The city suffered a massive budget shortfall last year. This year, the cuts look to be even more severe since there's nothing left to cut. People will want to know: Is this something we can afford? Is this something we should even pay for? Do you really think there's a worthwhile return on investment?

The money -- at least the initial money -- would be coming out of the public-private partnership program. The option money came out of that program, and anything immediate we might do would come from the same source. But here, agian, that would need to be discussed and approved by council. But when you talk about a situation like Southwest Center Mall,  it's akin to the redevelopment of a neighborhood, and I don't think we're viewing this as just any ol' mall. You can find a number of deteriorated malls and retail properties around the Metroplex or the country, for that matter, and you're not going to salvage them.

This particular site has meaning to a large number of neighborhoods around the area and has been representative of retail flight from that center. We look at it as more than just saving a mall. We're not in the mall business, and we're not into saving every deteriorating retail properties. But the community has made a strong statement, and we want to work with them.

As for a return on investment, like anything else in under-served neighborhoods, you're making a long-term play. It's just like in some of the other inner-city investments when we do land assemblage. You're betting your development partners will be able to create vertical product that will get you a return. And here you had a failed situation you're looking to retrieve. You still have three solid anchors and a financial institution in a partnership willing to work through a situation that had gotten petty bleak.

So I can't tell you what the immediate return on investment will be. It's not immediately calculable. But I would say to you, when you think of what the existing property tax value is and the sales taxes are and what you might be able to generate with a more stabilized situation, you could envision a pretty decent return if the adaptive reuse is successful. The fact of the matter is, any decision you make is a calculated risk. That would be my answer. I think that clearly we have scarce resources. Clearly we are going to have to prioritize how we use public money and where we use it, and this has been a clearly delineated priority. The question is what you do and how you do it.

But ULI was very clear: Even if you can put a few more businesses into the mall, even if you can save this or redevelop that, you're still stuck with the larger issues of: It's hard to get to, and there are, as the ULI puts it in its study, "visibility problems." Don't you have to deal with those issues as well?

Yes. Absolutely. You have a $15-million, $20-million issue as it relates to access. That's what it would take to improve access from I-20 and from I-35. But it isn't the sort of investment you could make at this point. If you had a master developer in place with a master plan and financing in place you might move on something like that. But ULI said very clearly you have to stabilize the situation and develop working partnerships with the major stakeholders, then embark on a planning exercise that embodies a shared vision that you can sell to a larger development partner. The guys we're working with right now might not want to take on the redo of the entire property itself, but they might want to partner with some other people on that. But you have to get it to a state where people want to consider that, and its been clear over the last 15, 20 years that that isn't the case.

Whenever this comes up, readers of Unfair Park always ask the same question or make the same suggestion: Why not tear down half the mall, put in a nice green space, completely redo the thing and change people's perception of Southwest Center as nothing but a dead mall on life support? Why not re-envision the entire thing from top to bottom?

That's absolutely something that's possible. What I was trying to communicate is we're not at the point where we can do that. First we need to have a situation where we're feeling comfortable that the three major anchors are in place for a while, and we've had good, positive conversations with them. We want to feel like there's a good game plan for the space and that re-tenanting is coming. And we want to develop a shared vision between the community and these key stakeholders. And as we do that, we develop a broader plan for the whole property. But we're still putting final touches on the stabilization phase. Get your platform solid before you build on it. That's where we are.