Midwest Mall Properties bought the two malls, along with Crossroads Mall in Oklahoma City, in December 2006 for about $400 million. By April 2009, the company had lost the Oklahoma mall to foreclosure. Maiden Lane LLC, an entity of the Federal Reserve Bank in New York, ended up with Crossroads Mall after the failure of Bear Stearns Cos., which held the mortgage on the mall.
Maiden Lane has sued Midwest Mall Properties in federal court, seeking a deficiency judgment of $65.4 million. Midwest Mall Properties maintains that only property secured the loan for Crossroads Mall, making foreclosure Maiden Lane’s only option. The case remains ongoing.
“I really believe that where we’re headed with our other two properties, through our strategic partnership, will carry us into the future and really launch us once this economy returns,” said John Flake of Little Rock, who formed Midwest Mall Properties with two partners.
Urban Retail spokeswoman Lisa Bell said the 1 million-square-foot Northwest Arkansas Mall has a 91 percent occupancy rate and is anchored by Dillard’s, J.C. Penney and Sears. The Citadel Mall, at 1.1 million square feet, is 90 percent occupied and has Dillard’s, J.C. Penney, Burlington Coat Factory and Sportsman’s Warehouse as its anchors, she said.
“If you look at locations like Colorado Springs and Fayetteville, in winter, there is cold and snow and ice,” Flake said. “In the summer, it’s hot in Fayetteville. So we believe … that there is a place for an enclosed mall.”
The future doesn’t seem so bright at Crossroads Mall, which opened in 1974 and sits at the junction of Interstates 35 and 240 in south Oklahoma City. In 1994, the Macerich Co. bought the 1.3-million-square-foot mall and nine years later spent $1 million on renovations that included the installation of an indoor carousel.
Flake said Crossroads Mall was part of a three-mall, all-or-nothing package offered to Midwest Mall Properties in October 2006. Even though the company “had never had any vision or experience with” the mall, it agreed to buy it as part of its purchase of the Arkansas and Colorado malls, he said.
In 2007, J.C. Penney closed its store at the mall, opting to relocate to smaller, stand-alone stores in nearby Moore and Midwest City. By early 2009, the mall’s three other anchor tenants — Macy’s, Dillard’s and Steve and Barry’s — also had closed their stores.
“We operated it with an extreme degree of enthusiasm and aggressiveness but the retail environment changed for those anchors,” Flake said.
He said after the anchors left, Midwest Mall Properties chose “because of the nature of our financing … to relinqush our interest” in Crossroads Mall.
The lack of anchors helped cause the mall’s value to plummet. The Oklahoma County assessor’s market value for the mall was $68.7 million in 2008 but fell to $16.1 million in 2009, said Steve Storff, the chief commercial appraiser for the assessor’s office.
Price Edwards and Co. of Oklahoma City, which managed the property through foreclosure, said the asking price for the mall is $24 million, but a company vice president declined further comment. Jim Swenson, who has managed the mall since 1994, did not return repeated phone messages seeking comment.
According to its website, Crossroads Mall has about 60 tenants. Its sprawling parking lots often sit empty.
David Bohanon, the managing broker in the Oklahoma City office of Marcus and Millichap Real Estate Investment Services, said while enclosed malls “will never be obsolete in an area like Oklahoma City that has extreme weather conditions,” that it might be time “to find a new use” for Crossroads Mall, although he doesn’t know what that might be.
“From my observation, it will have a tough time ever getting back big national retail tenants,” Bohanon said. “I don’t know if they can make it catering to small local retailers.”