Several area malls fighting to survive

Like many of America’s aging malls, some of these older Atlanta-area shopping centers — most are roughly 30 years old — have been struggling for years with sparse crowds and a dwindling number of tenants. Shoppers disappeared as wealthier families moved to other parts of town, and newer competitors such as discount retailers and open-air malls drew away traffic or desirable tenants.

Those issues have become more acute in recent years after the worst recession in decades, high unemployment and a crippled housing market shut down America’s shopping spree. As a result, the shaky mall industry has more riding on this season’s results than usual, say industry experts.

Industry data shows significant vacancies and weak sales at Greenbriar Mall in southwest Atlanta. The signs are mixed at North Point Mall in Alpharetta and Southlake Mall in Morrow, both of which have high vacancies but relatively strong sales, according to experts’ estimates.

Green Street Advisors recently estimated that 95 of the nation’s 1,000-plus large, enclosed malls have sales so low that they are in danger of failing, The Wall Street Journal recently reported.

In nationwide data compiled by Green Street, a real estate investment research firm, and posted online by The Washington Post, the firm gave six malls out of 25 in the Atlanta region a quality rating of “C” or lower.

Five of those malls had occupancy rates well below the 89 percent average of metro Atlanta’s 25 malls. Two — North DeKalb Mall and Union Station Mall — had sales at or below $200 per square foot, a level that some in the industry say could mean a mall is in danger of failing.

Such failures can cost hundreds or thousands of jobs and saddle communities with huge derelict buildings and lost tax revenues.

In Union Station Mall’s case, that already has happened. The mall went into receivership and closed Nov. 3, except the separately owned Sears and Macy’s stores. The mall’s owner — Lee Najjar, better known as “Big Poppa” on “The Real Housewives of Atlanta” — left Fulton County holding the bag for several years of delinquent property taxes on various land parcels at the mall, including $129,000 for 2010 property taxes.

Meanwhile, tenants at other malls soon could be taking a hard look at their financial results for 2010.

Traditionally, most retailers’ yearly profits hinge on their sales during the holiday season. That could mean that many malls’ tenants will be deciding early next year whether to stay or go based on how they do in December, say some experts.

“Every retailer looks at their year and their location based on what happens at Christmas,” said Chris Macke, senior strategist at CoStar Group, a real estate research firm. “It’s a critical time.”

Still, there are some reasons for cautious optimism.

General Growth Properties, the nation’s second-largest owner of malls, emerged intact from bankruptcy court in November after paying off its creditors and even returning some money to its shareholders — a rarity in Chapter 11 bankruptcy reorganizations. The Chicago company owns several malls in Georgia, including North Point Mall, Southlake Mall, Perimeter Mall and Cumberland Mall in the Atlanta area.

Macke said he sees signs of improving prospects for Atlanta’s malls this year, including falling vacancy rates that are lower than the national average, as well as lower than vacancy rates at other local retail venues such as strip shopping centers.

Better-than-expected retail sales reports for November also are buoying hopes a bit.

Still, signs of holiday cheer can be a bit thin at some malls.

On a recent weekday morning, a small crowd of parents and shoppers at North DeKalb Mall’s food court quickly evaporated after an orchestra of fifth-graders from Kittredge Magnet School finished their performance.

Within minutes, the crowd was gone. Half the shops surrounding the mostly empty food court were vacant, as were roughly 30 percent of the storefronts in the mall. Few shoppers walked around.

“It looks worse than last time [she visited]. Decidedly. It makes me sad,” said Debra Scott Remlinger, who had come to North DeKalb Mall to see her son, Ian Remlinger, play the cello.

She couldn’t recall the last time she had come to the mall, but she remembered that all the restaurants at the food court were open then, and the mall had a bookstore, now vacant.

“What could you buy here?” she asked.

Likewise, there were relatively few shoppers on a recent weekday at the larger Gwinnett Place Mall. Roughly 60 shops — about the same percentage as North DeKalb Mall, which has 20 vacant shops — were closed.

“This was the spot to be at,” Lorne McCaslin said of Gwinnett Place, until the Mall of Georgia and Discover Mills opened nearby about a decade ago and sent mall traffic skidding.

This month, however, McCaslin, owner of The Kneaded Perk Bakery Cafe, opened his third restaurant — in Gwinnett Place. His other two are in the Mall of Georgia and a shopping center in Gainesville.

McCaslin said Gwinnett Place’s owner, Simon Property Group (the nation’s largest mall operator) seems to be working hard to turn the retail center around.

“The management’s really behind us 100 percent,” he said. “They really spruced up the mall a lot,” and recruited a large Korean discount superstore, Mega Mart, as a new anchor.

“We felt that, with this Mega Mart opening up, that might bring a lot more traffic in the mall,” he said.

While the jury may be out on Gwinnett Place’s turnaround, another mall once reputed to be struggling, Cumberland Mall in Cobb County, recently was bustling by comparison. The large food court was noisy with lunchtime visitors, and only three of the shops at the 150-store mall appeared to be shuttered.

According to General Growth Properties, Cumberland underwent an “extreme mall makeover” in 2006-07. The company recruited Costco as an anchor, renovated the mall interior and added an open-air plaza with restaurants such as P.F. Chang’s China Bistro and Ted’s Montana Grill.

Such changes can make a big difference, said Macke, with CoStar. “What can really make a difference, as to whether one mall turns around quietly and another doesn’t, is tenant mix,” he said. The presence of P.F. Chang’s is a good sign, he said, because “they’re not going to go into a location unless it’s a solid trade area.”

Still, it’s often not easy for outsiders to tell a mall’s true state of health, he said. Some mall operators with low costs can thrive, even with a large number of empty stores, he said, adding that industry occupancy statistics can be misleading.

“All occupancy rates are not the same,” he said. Malls’ self-reported numbers typically don’t account for so-called “dark space,” where a store has shut down but the tenant is still paying rent under long-term leases.

He noted that North DeKalb Mall’s and Cumberland Mall’s reported occupancy rates were almost identical in the third quarter (94 percent versus 95 percent) even though North DeKalb has a far larger share of closed storefronts.

Scott Tiernan, with leasing manager O’Leary Partners, said North DeKalb Mall’s turnaround is going according to plan. So this Christmas is “definitely not make-or-break” for the mall, he said.

Tiernan said about 10 percent of North DeKalb Mall’s floor space has become vacant as the company has retooled the operation as a discount center that will feature big-box retailers and low-cost restaurants.

“Because of the economy, that’s what shoppers want right now. Kind of an intown Discover Mills,” he said, referring to the Gwinnett County mall.

Discount retailer Marshalls opened an anchor store in North DeKalb Mall in early November, and a new restaurant is expected to open in January, Tiernan said. The mall expects to sign up another big-box anchor to open in the first quarter of next year, he said. After it completes its anchor store lineup, he added, the company will focus on filling about 20 smaller vacant spaces with new tenants.

“We’ll start really concentrating on those next year,” he said. “This is a multiyear project to develop that center.”