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A Distressed Mall Rethinks Its Anchor Space and Returns to Its Role as Community Hub

November 6, 2023

Developers around the country are attacking mall redevelopment in a variety of ways. Many are razing the properties to make way for mixed-use projects that include some combination of housing, grocers, restaurants, entertainment, stores, offices, lodging and health care. Others are abandoning retail uses at the sites and instead are turning the existing structures into government offices and business parks. In Greater Binghamton, a community of 245,000 residents in the central part of New York north of the Pennsylvania border, a partnership of local families has borrowed a little bit from both strategies to reinvent the former Oakdale Mall.

Leveraging the strong location that many malls have — as well as solid industry relationships, incentives and a willingness to take risks — the partnership, in just four years, has converted most of the 1970s-era buildings at the intersection of Interstate 86 and N.Y. Route 201 into a retail-oriented mixed-use hub renamed Oakdale Commons.

“Oakdale Mall was an asset in the community since its opening nearly 50 years ago, but like other malls across the country, it had been deteriorating rapidly over the last decade due to the changes in shopping behaviors,” said Douglas Matthews, a principal of Spark JC, a limited liability company formed to invest in and oversee the redevelopment. “I think everyone realized that our plan could be really good for the area.”

Broome County Industrial Development Agency executive director Stacey Duncan grew up in the area and remembers going to the mall as a teenager because that’s where the action was. “Not unlike malls in other communities, it started going downhill by sort of a death by a thousand cuts, and then one day, it seemed like it was virtually disappearing before our eyes,” she recalled. “It has just been tremendous so see the transformation over there.”

Coming Back to Life

The roughly $150 million renovation began at the north end of the property in the 154,000-square-foot former Sears, a separately owned parcel that Matthews and his partners acquired midway through 2019. In January 2022, Spark JC purchased the remaining 846,000 square feet of the mall.

The developer has completed three projects in the Sears building – the 75,000-square-foot Lourdes Pavilion wellness center that comprises a 46,000-square-foot fitness area, an aquatic center with three pools, clinical space and a pharmacy; the Factory by Beer Tree Brew, a 28,000-square-foot brewpub with a 3,500-square-foot deck and a beer production and packaging facility; and 45,000 square feet of offices for 200 Broome County employees.

A large deck at the Factory by Beer Tree brewery and restaurant welcomes visitors to the north end of Oakdale Commons.

The brewery and Lourdes Pavilion, both pictured above, as well as offices for Broome County, bring 500 workers and thousands of daily visitors to the project.

Those three uses — dining, health care services and office — occupy the former Sears, which closed in 2017.

On the south side of the mall, Dick’s Sporting Goods opened its experiential House of Sport concept in the former 140,000-square-foot Macy’s in August. It includes an 18,000-square-foot outdoor field that becomes an ice rink in the winter, a 40-foot rock climbing wall and simulator golf bays. A 100,000-square-foot BJ’s Wholesale Club is opening early next year on the site of the former Bon-Ton department store, and a Dave & Buster’s will open a little later in former small-shop space.

Dick’s Sporting Goods’ House of Sport concept takes the catbird seat at Oakdale Commons, complemented by new Panera and Chipotle restaurants on pads.

House of Sport took over the former Macy’s.

A new BJ's Wholesale Club will add another significant traffic driver to Oakdale Commons.

For much of the mall redevelopment, Spark JC adapted buildings, but it departed from that strategy here and razed the Bon-Ton department store, above, to make way for the membership-only warehouse.

Panera and Chipotle recently opened on new pad sites in front of House of Sport, and an NBT Bank is under construction on another. Meanwhile, JCPenney continues to operate a well-performing store at the property. All told, occupancy at the project has increased from 33% to 86%.

“Doug’s team has done a wonderful job reinventing what was a dead mall, and you’re starting to see momentum build,” pronounced Dick’s senior vice president of real estate and construction Vincent Corno. “One of the things that has been overlooked by our industry is that the old model works; if you put relevant anchors in shopping centers, you can still draw customers. Oakdale Commons is proving that point.”

Risk and Reward

Matthews and Marc Newman, another Spark JC principal, have developed roughly 2 million square feet in the Binghamton market. Their interest in Oakdale Mall was piqued when they heard that Binghamton University wanted to purchase the Sears building after the store closed in 2017. At the time, the school planned to turn the building into storage.

Matthews and Newman believed such a move could ruin a prime retail location and hurt the community. The mall sat at the busiest intersection in the trade area and was across the street from a high-performing Wegmans grocer. A purchase by the university not only would have introduced a use that would have changed the character of the site but also would have removed the building from the tax rolls, Matthews said. “If the Sears building had become storage, then that would have marked the beginning of the end of Oakdale Mall as other anchors had gone dark,” he said. “It likely wouldn’t have become anything but a low-end center that someone would buy to try and eke out cash flow for a few years.”

Seeing an investment opportunity, Matthews and Newman stepped in and negotiated a deal to buy the Sears property for $3 million. Failure to gain control of the rest of the mall posed a significant financial risk, but Matthews and Newman wanted to build a project that would create new jobs and bring wellness, service and leisure options to the community.

As the Sears deal was coming together, the partners had identified the three users that would give that property new life. Arguably the most significant was with area health care provider Lourdes Hospital, which anchors the redevelopment with its Lourdes Pavilion. Matthews and Newman had developed some medical properties in the past and had a good relationship with the hospital, which had been considering creating a wellness concept targeting middle-aged and older residents. Lourdes Pavilion offers a fitness center, physical therapy, aquatic center, lab, imaging and primary care services, as well as activities like ballroom dancing lessons, Matthews pointed out. “It is very focused on getting people and helping them to get moving to keep our area healthy,” he added.

Lourdes Pavilion offers a fitness center, physical therapy, aquatic center, lab, imaging and primary care services, as well as activities like ballroom dancing lessons.

Broome County, which recognized the importance of rejuvenating the mall for the good of the community, signed an office lease there, Matthews continued, and the Factory by Beer Tree Brew microbrewery and restaurant added a food-and-beverage component to drive retail and leisure traffic. “The Lourdes Pavilion and Broome County deals were great, but we felt the building needed some sizzle,” he acknowledged. “The Factory by Beer Tree is a really cool spot with a massive deck.”

While reuse of the Sears building posed some challenges, reuse also was an advantage. The developer had to move columns to make room for the pool, but revamping an existing structure proved quicker and cheaper than demolishing it and starting from scratch. That became particularly important when the country shut down in response to the pandemic. Because work began at the front end of the crisis, the project avoided the bigger spike in construction costs that occurred a couple of years later. “The pandemic certainly had an effect, but we all shared in the increased cost of the project,” Matthews said. “Once we got started on it, the best course of action was to continue to see it through.”

Public-Private Efforts

As the Sears redevelopment progressed, Spark JC shifted its focus to acquiring the balance of the mall. It had transferred to special services in 2018, and Rialto Capital foreclosed on it in 2020.

Additionally, an unresolved lawsuit hung over the property. The previous mall owner had challenged the county’s $55 million property valuation and disputed $13 million in tax payments. The litigation added complexity that worked in Spark JC’s favor, making it more difficult for another investor to swoop in and buy the property, Matthews remarked. But it also was creating uncertainty among the county, school district and other taxing districts. As a result, Matthews and Newman proposed buying the mall and also working as a mediator to come up with a settlement between Rialto and those parties. Eventually, the taxing districts agreed to refund $6.5 million in taxes to Rialto, and Spark JC paid Rialto $7.5 million for the mall, Matthews said.

“There were a lot of balls we were juggling to try to make this deal happen, but it was a win for everyone,” he continued. “We got the mall, Rialto got rid of a distressed asset and the municipalities ended up with a reasonable settlement that could have been millions more if it had gone to court.”

To help finance the redevelopment of the mall, Spark JC negotiated nearly $9.4 million in incentives with the Broome County IDA. The benefits package reduces the tax assessment to 79 cents per square foot for five years, or about 25% of comparable commercial properties in the trade area. It gradually bumps up to $1.55 per square foot over 25 years. It also eliminates sales tax on construction materials used at the project, which has provided significant benefits to tenants committing to the location, especially amid the rapid rise in construction costs. Moreover, Spark JC received $12 million in grants to fund parking lot replacement, energy-efficient lighting, underground utilities and stormwater improvements.

“The savings on construction taxes and property taxes have made the project very appealing,” declared Matthews, whose group also received roughly $5.5 million in similar incentives for the Sears redevelopment. “The public-private partnership has made this project much more feasible; it would have been very difficult without it.”

The Value of a Modern Anchor

Spark JC hadn’t executed any leases when it fully acquired the main mall January 2022, but several retailers had shown interest. Dick’s, however, seemed like it would be a natural anchor for the reimagined center. Dick Stack, the founder of the sporting goods chain, opened his first store in Binghamton in 1948 when he was 18 with $300 given to him by his grandmother. Among other connections to the community, Dick’s continues to host a PGA Tour Champions tournament in nearby Endicott every year.

Dick’s Sporting Goods founder Dick Stack opened his first store in Binghamton, New York, 10 minutes from Oakdale Commons, which now hosts Dick’s Sporting Goods’ largest House of Sport store. The store opened in 1948 and is pictured above some time later.

“We thought it made sense to put a Dick’s at the south end in the former Macy’s building,” Matthews noted. “It was closest to the intersection and had great visibility, so we felt it would be a billboard location.” Apparently, Dick’s leadership thought the same. In fact, Dick’s had approached the former mall owner about the Macy’s space some years prior, Corno recalled. Consequently, when Spark JC arranged a meeting with Dick’s executive chairman Edward Stack, the developers learned that every time Stack had driven by the intersection, he’d thought the highly visible and central location should have a Dick’s store in the building.

In August 2022, not long after that meeting, Dick’s announced Oakdale Commons would host the largest Dick’s House of Sport yet. So far, Dick’s has opened 12 House of Sport stores, including four new stores and eight conversions of side-by-side Dick’s and Field & Stream stores, Corno said.

“Oakdale Mall was on our radar for a long period of time,” he explained. “We’ve always admired the quality of the location, and the box we ended up taking is the catbird seat. But what’s really unique about that store is that it’s a 10-minute drive from the humble beginnings of the Dick’s enterprise. And when you compare it with what we’ve become at Oakdale Commons, the contrast is really something to see.”

Landing Dick’s helped attract BJ’s Wholesale Club and Dave & Buster’s, Matthews said. In turn, the increase in occupancy has fueled additional interest from new tenants and from existing tenants that want to renew their leases. Some also want to beautify and modernize their spaces or increase their footprints amid higher traffic and sales following the Dick’s House of Sport opening, he added.

Final Touches

Moving forward, the developer intends to backfill spaces with mixed uses that will enhance the synergy at Oakdale Commons. Among other plans, Spark JC has earmarked the 88,000-square-foot former Bradlees discount department store for a potential second phase of the Lourdes Pavilion. Burlington was the most recent tenant in that space. Repositioning it as a same-day surgery center would provide the community with an alternative to the hospital for less invasive procedures, Matthews said.

The developer also is considering an indoor food truck concept to serve the more than 500 employees working at Oakdale Commons and the thousands of visitors there each day. “We want to get away from the old food court that everyone is familiar with,” he said. “We’re working on some ideas that will give the property a more progressive feel and make it more attractive for people to come to the Commons for lunch or to stay at the Commons if they’re working there.”

Broome County IDA’s Duncan noted that the backside of the mall that lacks frontage remains a challenge but that her group is working with the developer to gather resources for infrastructure improvements. “I’m excited to see what’s next with these guys,” she said. “They have something for everybody there, and they always surprise us. They came in for the save, and that is a good feeling.”

By Joe Gose

Contributor, Commerce + Communities Today

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