Phillipsburg Mall ordered for sale
Beleaguered Warren County shopping center among five properties parent company is selling to pay down debt
Tyrone Richardson / The Morning Call
Phillipsburg Mall is home to anchors like Sears, Bon-Ton, Kohl’s and JCPenney’s.
But have you noticed that the mall’s corridors are riddled with vacancies?
I witnessed the sea of empty storefronts as I walked through the mall during lunchtime Wednesday. I wasn’t necessarily dodging tumbleweeds, but the dearth was obvious.
Phillipsburg has one of the highest vacancy rates among the Lehigh Valley’s shopping malls, with nearly three dozen empty storefronts among its more than 90 spaces in its online directory.
Vacancies are plaguing many Valley shopping malls in this lethargic economy, and Phillipsburg outpaces most. The vacancy rate at Phillipsburg Mall is nearly four times the 9 percent average for regional malls across the country, according to an April report by Reis Inc., a real-estate research firm. Phillipsburg’s large vacancy rate could also make its sale a challenge, according to one retail expert
The 577,000-square-foot mall is among five properties Pennsylvania Real Estate Investment Trust is looking to sell to pay down debt, company officials recently announced.
The Philadelphia-based firm, also known as PREIT, announced during an earnings call late last month that in addition to Phillipsburg, it plans to sell Beaver Valley Mall in Beaver County, North Hanover Mall in York County, Chambersburg Mall in Franklin County and Orlando Fashion Square in Orlando, Fla.
“The company is focused on leverage reduction and one way to accomplish this is to sell non-strategic assets,” said President Ed Glickman during the earnings call. “To that end, we are in the market with five assets for disposition.”
During the call, company officials said they haven’t sold any of the malls yet, but have heard from potential buyers.
PREIT owns 38 malls, including Phillipsburg Mall, South Mall and Palmer Park Mall. The firm also co-owns Lehigh Valley Mall and Whitehall Mall with Simon Property Group.
Phillipsburg Mall General Manager Pam Richetta deferred comment about the mall’s sale to officials at PREIT’s headquarters. Those officials did not return phone calls.
The large number of vacancies could make a sale challenging, according to Jeff Green, president and CEO of Phoenix-based retail consultant Jeff Green Partners.
“It’s harder to sell a distressed mall and with the significant vacancy rate, however what they need to value is the site or the land because usually malls have good real estate,” Green said.
He added that the Lehigh Valley’s burgeoning retail marketplace has made it difficult for the mall to lure both merchants and consumers.
“The competitive environment in the area has strengthened in the last 15 years. You have Promenade Shops at Saucon Valley and the upgrade at Lehigh Valley Mall over the years and there’s also new retail in Bethlehem,” he said. “You have a lot competitive forces that have also impacted Phillipsburg Mall.”
The asking price of Phillipsburg Mall is not advertised in online real estate listings, but PREIT acquired the mall in its 2004 buyout of Crown American Realty Trust of Johnstown for $1.2 billion. Phillipsburg Mall was built in 1989 for $40 million and its last remodel was in 2003, according to PREIT’s website.
Phillipsburg has been hemorrhaging stores in recent years. That includes some high-profile losses like FYE and PacSun, merchants that targeted the mall in their nationwide retrenching amid lackluster sales.
Such losses have eroded the mall’s reputation as one of the Valley’s mainstays for teens and 20-somethings. The mall still offers several youth-focused merchants, including Justice, GameStop and the Valley’s only H&M store, but lost others like American Eagle Outfitters and GAP.
I’ve been shopping less at Phillipsburg Mall after some of those merchants closed. I’m still drawn by H&M, but my trip on Wednesday was to hear what shoppers were saying about the mall.
Some shoppers said they like the mall for its convenience, lack of congestion compared with other area malls and the H&M store. Others said the mall’s theme has shifted into a mother’s haven with stores such as Gymboree, Old Navy and Motherhood Maternity.
That’s just fine with shoppers like Nicci Wright, 34, of Forks Township.
“Palmer Park may be a nicer mall, but it doesn’t have those stores,” said Wright as she unloaded a stroller from her SUV on Wednesday afternoon.
She was shocked when I informed her GAP closed.
“I didn’t know that,” she said. “That was one of the stores I wanted to go to today.”
The mall also recently lost Pizza Hut, which was on an out parcel between Sonic Drive-In and Panera Bread. The space is proposed for Chick-fil-A, according to PREIT’s website.
So Chic-fil-A is a piece of good news at the mall. It hasn’t all been bad.
Schuylkill Valley Sports moved into the former Finish Line space. Mall officials recently announced additions like Weight Watchers and Curves, and the “coming soon” of Kare Foot Spa. Wireless Nation is moving into a space near JCPenney’s.
To keep momentum, Green suggests the mall try nontraditional merchants such as a hotel or supermarket, and maybe redevelop with mixed uses like office space and housing.
Montgomery Mall, for example, turned to a nontraditional merchant with high-end grocer Wegmans, which is building a store at the former Boscov’s department store space. The North Wales, Montgomery County, shopping mall also has had problems offering a full selection of stores in recent years.
Westgate Mall in Bethlehem has a Weis Markets and Whitehall Mall had a Weis years ago.
PREIT is not the only mall operator to make tough choices to pay down debt.
General Growth Properties, one of the largest mall operators in the nation, filed for Chapter 11 bankruptcy protection in April 2009 and emerged from bankruptcy 19 months later.
Speaking of growth, the Valley continues to add discounters.
Bottom Dollar Food opened days ago at 719 Stefko Blvd., Bethlehem.
The North Carolina-based sister of grocer Food Lion has also recently opened stores in Allentown, Fountain Hill, Whitehall Township, Lower Nazareth Township, South Whitehall Township and Quakertown.
Industry experts have said cheap real estate and the sour economy are fueling the growth of discount grocers.
Discounters are a boon for the commercial real estate market.
An April report by ChainLinks Retail Advisors, a real estate brokerage organization that focuses on retail property, suggests that discount chains are among the most active retailers opening new stores.
The report said Dollar General plans to add 650 stores this year, Dollar Tree plans 300 new stores and Family Dollar wants to open 500 stores.
That growth has trickled down to the Valley. Weeks ago I reported Dollar General wants to open a 9,000-square-foot store at 2811 W. Emmaus Ave., Allentown.
Steakhouses are also booming.
A LongHorn Steakhouse is being constructed at Lower Nazareth Commons shopping center off Route 248.
In 2010, LongHorn opened its inaugural Lehigh Valley restaurant at the former Ground Round in Whitehall Township. That year, a LongHorn spokesman said the chain was aggressively expanding its footprint on the East Coast.
LongHorn is part of Atlanta-based Darden Restaurants Inc., owner of several restaurant chains, including Red Lobster and Olive Garden.
Darden is known for clustering restaurants to save resources and trim costs.
Perhaps Easton area residents will finally get a much-wanted Red Lobster. The Valley’s only Red Lobster is in Whitehall Township, by an Olive Garden and LongHorn.
Other steakhouses in growth mode include Logan’s Roadhouse, which opened months ago in Hanover Township, Lehigh County.
A dogfight — actually, a fight for dog business —is brewing on Route 248 in Lower Nazareth Township.
Petco is opening a store soon next to Five Below in Lower Nazareth Commons.
Across the road, competitor PetSmart plans to open a store next to Kohl’s on June 2, according to its website.
The addition gives PetSmart three locations in the region, still less than Petco, which has six.