Tale of two Colorado Springs malls: Chapel Hills, Citadel face challenges of changing tastes

By Rich Laden Published: August 11, 2013 | 9:40 am 0

Some real estate experts say old, enclosed shopping malls are like dinosaurs, slowly dying out because of their environments - in this case, online shopping and the popularity of trendy retail complexes that have transformed consumer buying habits. - The Chapel Hills and Citadel malls in Colorado Springs insist, however, that they won't become extinct anytime soon.

Representatives of The Citadel, built in 1972, and Chapel Hills, which opened a decade later, point to numerous upgrades they've made recently at the properties, along with the arrival of new stores and restaurants they've attracted, and existing tenants who have poured money into renovating stores.

But at a time when both shopping centers tout improvements to their properties, some real estate experts say the Springs' retail landscape increasingly is a tale of two malls - with Chapel Hills and The Citadel heading in opposite directions.

Because it serves areas of the Pikes Peak region with stronger demographics, Chapel Hills is better positioned for growth, industry experts say. The Citadel, meanwhile, is in an older part of town and its customer base - while more populous than that of Chapel Hills - nevertheless is less attractive to retailers. Consider:

In a 4-mile radius of the Chapel Hills Mall, northeast of Academy and Briargate boulevards, median household incomes are $69,750 and per capita incomes are $33,529, according to 2013 figures provided by Stoffel & Associates, an Irvine., Calif., retail consultant that based its findings on information compiled by Nielsen Inc., There also are about 35,000 households with annual incomes of $75,000 or more in the area.

Those figures contrast sharply with the 4-mile area around The Citadel, northeast of Platte Avenue and Chelton Road, where median household incomes are about half as much - $36,978 - and per capita incomes are $20,499. There are a little less than 21,000 households with incomes of more than $75,000 in the 4-mile area around The Citadel.

The figures are significant because retailers want to locate where shoppers have money in their pocketbooks. Based on those numbers, "the future appears brighter for Chapel Hills than The Citadel," said Greg Stoffel, of Stoffel & Associates.

Both malls have survived tough times. They've gone through ownership changes in the last several years, and watched stores bolt for newer shopping centers or close during the local and national recessions.

The 1.2 million-square-foot Chapel Hills was built by Chicago-based General Growth Properties, one of the nation's largest mall owners. After General Growth emerged from bankruptcy in 2010, it sold Chapel Hills in July 2011 for $71.5 million to a partnership of New York-based Garrison Investment Group and Coyote Management of suburban Dallas. Garrison now is the mall's sole owner.

Garrison has embarked on changes that will be key to Chapel Hills' future, experts say. Most notably: Garrison bought a vacant Kmart store at the mall and razed it, along with an old 15-screen Carmike movie theater complex. That move made room for a new Carmike 13 complex that will open in mid-November.

When moviegoers come for entertainment, many of them also eat at restaurants or shop before they get to the mall or after the movie, said Chapel Hills general manager Victoria Harley.

"In today's market, I think the regional shopping center needs that critical entertainment component that adds synergy to the shopping mall experience," Harley said.

The mall's anchors remain J.C. Penney, Dillard's, Macy's, Burlington Coat Factory and Dick's Sporting Goods. Chapel Hills also snagged H&M, the hip Swedish clothier that will open in November, and announced it will add Shoe Dept. Encore, a North Carolina shoe store chain.

Some privately owned buildings on individual parcels ringing the mall also have been transformed; a vacant Pizza Hut was torn down and the area's first Steak 'n Shake was built in its place, while a former Arby's was remodeled into a Jimmy John's.

Such moves give momentum to a property and provide a reason for stores to consider locating there, said Patrick Kerscher, a broker with Landmark Commercial Group in the Springs. The theater complex, in particular, makes the mall a destination and increases foot traffic, he said.

"The worst thing you can do is become stagnant," Kerscher said. "They've got a lot of positive momentum going. The goal there is to keep that momentum."

Citadel representatives say they have momentum, too, although its future is more hotly debated in the local real estate community.

The 1.1 million-square-foot Citadel was purchased in 2007 by Arkansas-based Midwest Mall Properties. Four years later, the financially troubled owner signed over the mall to its lender; the current owners are partnerships controlled by CWCapital Asset Management LLC of Maryland.

The Citadel also counts J.C. Penney, Dillard's and Burlington Coat Factory as anchors, along with Sportsman's Warehouse, which is in a free-standing building.

Newcomers to The Citadel include rue21, a suburban Pittsburgh-based apparel and accessories store for young people that opened its first Colorado Springs store this month. The chain has nearly 1,000 stores across the country.

Seven Status, a locally owned clothier that donates a portion of its sales to victims of sex trafficking, also opened, she said.

Stores that have undergone or are finishing remodelings include Buckle, a national apparel, footwear and accessories store; Aeropostale, the specialty clothing and accessories store for young men and women; and Champs Sports, said Citadel marketing director Jill Lais.

In the past year, The Citadel has improved its curb appeal by adding flowers to exterior entrances, putting in new food court furniture and updating seating areas with cushier chairs and new carpeting.

The upgrades "confirm our commitment as a shopping center to our retailers and to the community," Lais said. "It's critical, especially as a shopping center. People come for the shopping, for the stores, but they also come as part of an experience, as well."

The Citadel's occupancy is in the low 90s, Lais said, and sales on a per-square-foot basis - an industry measurement - continue to grow, although she declined to disclose the numbers. Harley said Chapel Hills' occupancy is similar; she also declined to disclose sales figures.

"They have good traffic counts," Kerscher, of Landmark Commercial, said of The Citadel. "Tenants seem happy."

Other brokers, however, question The Citadel's future.

Rich Walker of First Properties Inc. said the mall doesn't have enough customers with disposable incomes, which is a turn-off to retailers.

Despite its new stores, The Citadel has added few major retailers and restaurants in recent years, he said. The mall also is near what city officials have identified as a troubled portion of Academy Boulevard that's lost several stores in recent years, while some buildings that ring the mall remain empty after closing years earlier, such as a Krispy Kreme donut store that closed in 2006, Walker said.

"The Citadel has seen their time," Walker said. "It's passed them by. They relied on the old department stores, and let's face it, department stores, they're having problems. They're getting killed by retailers without brick and mortar. The Internet's killing them."

Some aging malls around the country have been razed in favor of open-air retail centers, such as so-called lifestyle centers similar to the Promenade Shops at Briargate on the north side.

Lais, The Citadel's marketing director, says ownership can't say for sure what will happen to the mall. For now, it's moving forward in a positive direction, she said.

"I can just say right now, we're committed to the success of the center," she said. "We're reinvesting. The tenants are investing in the center. We're continuing to get new retail."

The Citadel could continue without major renovations if its sales are acceptable to owners and the mall doesn't suffer any major tenant losses, Stoffel said. Even though its household incomes aren't great, the population base within The Citadel's 4-mile radius is about 70,000 more than that of Chapel Hills, his figures show.

"As long as there's no major vacancies, there may not be an apparent need to do anything," Stoffel said.

Both malls have lost anchors in recent years; Kmart closed at Chapel Hills in 2009, while Macy's shuttered its Citadel store the same year.

The disposition of those two buildings perhaps signals the different directions the malls are heading.

Garrison's purchase and razing of the Kmart showed it was aggressively seeking to stay relevant, retail experts say.

However, the 193,000-sqauare-foot Macy's building remains vacant; its ownership is separate from the rest of the mall, and the building was purchased in 2010 by ICA Properties of Odessa, Texas.

ICA continues to look for tenants, and interest has been shown by traditional retailers and office users, said Tom Glassman, an ICA asset manager. However, no deals - either for a single tenant or multiple users - are in the offing, he said.

While ICA has sought to lease the building, it's also open to selling, and has listed the property for $6.5 million, Glassman said.

"We see the strengths of The Citadel mall," Glassman said of its central location and solid population base. "And so other potential users, which could be a buyer, will also see that strength and they may want to buy the property. We're not going to pass on a deal if they have to own. There's a lot of (retail) companies that like to own their own property."

And yet, some brokers questions if a single retailer will want nearly 200,000 square feet in an existing building at an aging mall.

"There are large spaces in more desirable trade areas that haven't filled up," said Dan Rodriguez, a broker with the Madsen Real Estate Group in Colorado Springs. "A tenant that large will be hard-pressed to locate at The Citadel."

As the malls jockey for tenants and market position, some retail industry experts wonder if they can reclaim their place in the shopping world.

"The only malls that really do well are the very, very high-end malls like Park Meadows," Walker said. "They do that because they're willing to invest hundreds of millions of dollars into great architecture and entertainment."

Shopping habits, Rodriguez said, have simply changed.

"It used to be that a mall made more sense when someone was going to look at a pair of jeans at 10 different stores in the mall, and then pick which ones they liked best and purchased them," he said.

"But now, we're doing more looking online, and either just buying online direct, or comparing a handful of different options online and then driving to the store and just to the one store we want to shop at, and picking them up. We're less inclined to just go and browse than we used to be."

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Contact Rich Laden: 636-0228

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WHAT YOU SAID

We turned to Facebook to ask people whether malls are going the way of the dinosaur, whether they still shop at enclosed malls and which ones they prefer. Here are some of the nearly 60 responses we received:

- Victoria Heinecke: Have you tried going to a mall lately? Everytime I go, I'm chased by some 20-somethings trying to sell me hand lotion, cell phones, or cheap junk. No thanks.

- Robert Renicker: Chapel Hills is great! I much prefer a mall over outdoor shopping areas. You can't beat them in the winter and they're great in the summer too.

- Jenei Berger: I like taking my 3 year old to Chapel Hills. There's a lot to look at, and I don't have to worry about the weather or moving vehicles.

- Bill Guman: Lifestyle Centers (glorified outdoor strip malls with overpriced shops and restaurants) are the trend now. The two enclosed malls in the Springs should be sold off to a school district. With a few modifications they'd make perfect K-12 schools.

- Sarah James: I like The Citadel over Chapel Hills but I pick Park Meadows over them both.

- Don Branum: Amazon killed shopping malls. If I don't have to brave crowds (and possibly violence) to buy something that's a nice-to-have at best, I'm not going to.

- Joan Lucia-Treese: I shop both malls often. I especially like them in the winter time and inclement weather.

- Bill Hathaway: I think they will be around forever. Still a great place to look around out of the weather and see the most in the small amount of time.

- Linda Riendeau Schlarb: I like outdoor, small businesses if possible. If I need a chain store I like The Shops at Briargate, and believe me that is a long way from home for me.

- Lani Railton-Henneman: I like indoor malls. Only go to Chapel Hills, though. Citadel is getting more dangerous by the day. I don't feel safe walking to my car and shopping there alone even during the day. I do drive to Park Meadows to shop, just because it has more to offer and is in better shape.

- Joy Ostrowski Absalon Park Meadows has so much more to offer. The Springs is in serious need of a new, fresh, updated mall with better stores.

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