June 2, 2011
For the first time in its nearly three-decade-old history, the Chapel Hills Mall has a new owner. And new ownership could mean upgrades to at least one portion of the retail center.
The mall, which opened in 1982 on Colorado Springs’ north side, has been purchased by a partnership formed by Coyote Management LP of suburban Dallas and New York-based Garrison Investment Group.
The partnership completed the acquisition Wednesday, said Coyote Chairman and CEO Michael Rulli. He declined to disclose the price.
Chapel Hills, east of Academy and Briargate boulevards and with 1.2 million square feet of retail space, is one of two enclosed, regional malls in Colorado Springs. Its anchors include Sears, Macy’s, Dillard’s and JC Penney. The Citadel mall, with about 1.1 million square feet, opened in 1972 at Platte Avenue and Chelton Road in the center of the city.
Chapel Hills’ acquisition marks the end of an era. Chicago-based General Growth Properties, Chapel Hills’ original developer and the nation’s second-largest mall operator, filed for Chapter 11 bankruptcy protection in April 2009. General Growth emerged from bankruptcy in November, and told its stockholders this year that Chapel Hills would be turned over to its lender by summer if not sold.
General Growth previously described Chapel Hills as one of its “underperforming” properties. The company owed $112.2 million on the mall at the end of 2010, according to a U.S. Securities and Exchange Commission filing.
Generally speaking, purchasing a mall in 2011 might be akin to buying a newspaper, investing in a video rental business or acquiring a bookstore. Nationwide, malls face major hurdles because of changing demographics and technologies
In Chapel Hills’ case, it’s lost several well-known tenants over the past few years, such as Kmart, Old Navy and the Clerk and Recorder’s Office. The mall’s occupancy rate is about 85 percent, mall officials say.
Newer, open-air shopping centers such as First & Main Town Center to the east and Promenade Shops at Briargate to the north have become trendy shopping areas. Retailers in general — in malls or other bricks-and-mortar centers — face growing competition from Internet retailers.
But Rulli said malls are far from extinct and have different challenges and opportunities, depending on the market, he said.
Chapel Hills is surrounded by thousands of higher-income households, Rulli said. It’s highly visible, has good access via Interstate 25 and other major roadways and is near the Air Force Academy, he said. While Chapel Hills competes with shopping centers to the north and south, its location in the center leaves it as the retail “focal point” in that part of town, Rulli said.
“If there wasn’t a thriving area around that property, both residential as well as commercial and retail, we’d be very hesitant,” he said.
The new owners are eyeing upgrades to the east wing, where Kmart had been, Rulli said. The Kmart building wasn’t owned by General Growth; Coyote-Garrison has had talks with the building’s owners on its acquisition, he said.
Meanwhile, the new owners are looking to bolster areas leading to Kmart, which have lost tenants over the years. No decisions have been made on the upgrades or how extensive they might be, Rulli said.
“It’s an area that needs to have a lot of life pumped into it,” he said of that part of the mall.
The rest of the mall is in good shape but might need minor cosmetic upgrades, Rulli said. Improvements are expected to take place over three to five years, he said.
Coyote’s website says it “owns and manages market dominant properties in secondary trade areas.” With the addition of Chapel Hills, it controls about 4.5 million square feet in five malls in five states. Simon Property Group, the nation’s largest mall owner, has 340 properties and 250 million square feet, according to business publication Dun & Bradstreet.
The new owners’ challenges will be to avoid losing anchors, while building the mall’s tenant base, said Mark Useman, a broker with Sierra Commercial Real Estate in the Springs. “I don’t think they can just sit on it and sit on it,” Useman said. “They’ve got to do some things to maintain that tenant base and improve it, or else you’ll have more attrition.”
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