Palmetto Moon gift and novelty retailer Bob Webster walks out of his Citadel Mall store and looks at all the shuttered shops near his business.
Comparing the two malls
Opened: 1981 in West Ashley
Size: 1.1 million square feet
Opened: 1972 in North Charleston
Size: 996,000 square feet
“It's disheartening,” he said as one by one he counts nine gated-up storefronts in the vicinity of his retail outlet. “Maybe I need to move.”
Other empty shops pepper the 1.1-million-square-foot West Ashley shopping center in every wing while standalone kiosks sit empty. In two places, tubes collect water from leaking skylights and direct it toward plants below. Missing bathroom tiles, chipped flooring and leaks over the Food Court show signs of aging and the need for maintenance in the 32-year-old building.
With loads of empty space and non-anchoring tenants that draw limited foot traffic, the once-prominent shopping landmark now faces another problem.
In May its owners, Chattanooga, Tenn.-based CBL & Associates Properties started missing its monthly mortgage payments on the $68 million balance of a $75 million loan it took out in 2007.
That resulted in U.S. Bank National Association claiming the owner defaulted on the 10-year loan. It then sued to foreclose on the property. In the interim, a judge appointed New York-based Spinoso Real Estate Group as a receiver to manage the mall, effective Sept. 1.
In addition, CB&L in its most recent quarter took a $21 million write-down in the book value of Citadel Mall. As of June 30, the shopping center was worth $23.9 million, according to a filing with the Securities and Exchange Commission.
“Citadel Mall generates insufficient income levels to cover the debt service on the mortgage,” according to CBL's financial filings. “In June, the lender on the loan began receiving the net operating cash flows of the property each month in lieu of scheduled monthly mortgage payments.... The loan is currently in default, and the company has classified Citadel Mall as a non-core property as of June 30.”
Phil Alldredge, the shopping center's general manager, declined to disclose the vacancy rate of the mall.
“As we work through this process, we expect to conduct business as usual and that our retailers, vendors and customers will see no disruption in day-to-day operations of the mall,” he said Monday. “Our goal is to assure that Citadel Mall remains a vibrant retail entity to serve the community.”
Alldredge added cosmetic changes to handle some of the maintenance problems are on the way “soon.”
As for the mall's larger problem of not generating enough foot traffic to support itself, he said, “I think there are some things that can be overcome, but I'm not in a position to talk about it.”
Immediately after financial markets collapsed in 2008, Citadel Mall, like other shopping centers across the nation, began losing big-name tenants. In 2009, the vacancy rate was 25 percent. Many of the same darkened retail slots inside the sprawling mall never turned the lights back on.
Instead, a fitness center, a restaurant and a hodgepodge of unconventional mall tenants fill some of the vacancies left as merchants pulled out. A railroad museum, a military museum, a massage business, a child-care shop and a dance studio are among them.
The mall's lagging performance was evident in March, when CBL issued its annual report. It said the property generated $233 in sales per square foot for 2012. By comparison, Northwoods Mall in North Charleston, also owned by CBL, had $338 in sales per square foot last year.
Citadel Mall's major anchors Belk and Target appear to be doing well, but anchor J.C. Penney hasn't bounced back from a botched attempted corporate makeover. Sears sits on the wing with most of the vacancies at its entrance.
In contrast, Northwoods Mall has one small vacancy, said spokeswoman Leigh Burnett, who once had an office at Citadel Mall but no longer does. She declined to comment on Citadel Mall's financial problems.
Commercial real estate agent Will Sherrod of Lee & Associates said the shopping center “has sort of dropped off the map in the past 10 years or so.”
Enclosed malls are struggling all over the country, but Sherrod noted that Northwoods Mall is doing better because it has retail all around it, making it more of a shopping destination. It's also more centrally located to the bulk of the region's population base.
“The demographics in the Northwoods area are some of the strongest in the tri-county area,” said Sherrod, who specializes in leasing retail space. “At Citadel Mall, you are trying to draw from the West Ashley corridor, which compared to Northwoods, is limited. It could be it just doesn't get the traffic.”
The bigger question, he said, is whether Citadel Mall remains as it is. The bank will likely try to find a buyer once the foreclosure is finalized.
“Maybe it's just aged itself out, and it's time for something new to go there,” Sherrod said. “It's a good piece of property.”
He noted that nearby Ashley Crossing shopping center at Interstate 526 and Magwood Road stagnated when Walmart pulled out in 2006 and moved near Bees Ferry Road, but it bounced back and was reinvented over the past two years as Kohl's, Marshalls and others filled it back up.
Mall tenants realize Citadel Mall needs more than a brush-up.
“The mall could use some work,” said Casey Glowacki of Sesame Burgers and Beer near the Food Court and the entrance to Target. “It's a ghost town. It is a little less than desired. They haven't done anything as far as upkeep. Just look at the ceilings in the Food Court area. They are leaking.”
He believes Tanger Outlet Center in nearby North Charleston probably drew some shoppers away from the mall after it opened in 2006.
“They have quality businesses. Banana Republic, Nike and women's apparel shops — all of those places pulled out of the mall. There are places in the mall now where you can't buy stuff. They are just trying to make rent.”
As for his restaurant, which opened in 2009 and has its own private entrance separate from the mall, Glowacki said it's doing “really well.”
“If the mall closed tomorrow, and we were still open, we would do just as well,” he said.
Webster from Palmetto Moon said the Citadel Mall store continues to prosper, but it tallies up the least amount of sales among the eight shops in the chain across South Carolina.
He believes the reason the mall is hurting is that as national tenants pulled out, “there are fewer and fewer reasons to come to the mall other than as a destination for certain stores. Shoppers come to destination stores and then leave. There is no compelling reason for them to come to the mall. If there were more shops, it would give people more reasons to come to the mall.”
“You have to have foot traffic,” Webster said. “You can't close a sale unless you have people in the mall and in the store.”
Reach Warren L. Wise at 937-5524 or twitter.com/warrenlancewise.