After paying off millions in delinquent assessment fees for the Pittsburgh Mills mall in Frazer, owner Namdar Realty Group says it’s looking forward to the mall’s future but, so far, hasn’t said what that future will be.

The Mills mall was scheduled for sheriff’s sale last week, but Namdar paid what it owed in special assessments — about $11.5 million — on Sept. 29, canceling the auction.

“We are pleased to announce that Namdar Realty Group has reached an agreement with Frazier (sic) Township and has paid all taxes in full, ensuring our continued ownership of the Pittsburgh Mills mall and underscoring our commitment to the community,” a representative of Namdar wrote Monday morning in a statement to the Trib.

“Following this agreement, Namdar Realty Group is exploring all future options for this property including retail enhancements, as well as potential repositioning and redevelopment. During the evolution of this project, the mall’s day-to-day operations and its tenants will not be affected. We look forward to providing updates as this process unfolds,” Namdar’s statement said.

Asked how Namdar is exploring its options, a representative of the company said: “We are currently in the initial phases of evaluating the future prospects of Pittsburgh Mills. The property is a top priority for our firm, and we plan to keep the community updated as we progress through this assessment.”

Frazer Supervisor Lori Ziencik, who also is the township secretary and treasurer, said Monday the township has not heard from Namdar.

“Hopefully, they’re going to take an interest in the property,” she said.

Fate of shopping malls

Steve Jellinek, head of CMBS research at DBRS Morningstar, said the landscape has shifted over the years for commercial real estate.

“From Namdar’s perspective, they think the property is more than whatever they paid for it and back taxes (the $11.5 million in special assessments owed),” Jellinek said.

Pittsburgh Mills opened in 2005. Namdar acquired it in 2018 and paid $11 million.

This week, Namdar sold one of its mall properties in Florida, but the details have yet to be disclosed. This summer, Namdar acquired the Louis Joliet Mall in Illinois for $31.4 million, and it paid $9.5 million for the Crystal Mall in Connecticut.

A potential strategy Namdar may have with the Mills is to invest money into the property to bring back tenants, Jellinek said.

Township officials have said the mall has 31 tenants — leaving a 75% vacancy rate.

The value of land also could be worth something, Jellinek said. Potential demand for multiple types of facilities, such as a hotel, industrial or office space, could be part of Namdar’s strategy to hang on to the property, he said.

Retailers at the mall say they plan to proceed with business as usual.

“We are focused on continuing to provide value for our customers through the savings they can experience through our daily online auctions,” said Shawn Allen, M@C Discount co-founder and owner. “We are hopeful that all issues between the landlord and the township are resolved so that we can continue to serve our loyal bidders in the Galleria at Pittsburgh Mills. We love the connection we have with the community of Tarentum, the surrounding area and the city of Pittsburgh. We look forward to growing this relationship in the coming years.”

M@C Discount is housed in the space that was formerly the home of Sears Grand.

A spokeswoman for Joann Fabric and Crafts said there will be no changes in how its store at the mall operates.

What makes a mall successful?

The covid-19 pandemic and shutdown didn’t help the shopping mall industry, Jellinek said.

“It made malls that were teetering go out of business, and malls that were already doing well before the pandemic, with owners with deep pockets, they survived,” he said.

A good location, mixed with investments and the right tenants, is the equation for a successful shopping mall. Indoor malls need “experiential tenants” that attract shoppers, getting them to come inside to shop, eat, play or watch a movie, Jellinek said.

“Without that piece of the puzzle, without that experiential piece, they’re most likely going to under perform,” Jellinek said.

High-end stores, such as an Apple Store, also attract patrons to malls, he said. He cited a recent article that found malls with a Cheescake Factory restaurant tend to perform better than ones without.

Jellinek also cited a recent trend of omnichannel retailing, where retailers engage with customers online.

Gone are the days where an “anchor store” attracts traffic to a mall, he said. E-commerce and big-box stores have replaced them for customers.

About 10 years ago, Namdar acquired the Chambersburg Mall in Franklin County. Mike Ross, president of the Franklin County Area Development Corp., said the mall was “woefully under-performing” when Namdar bought it, and Namdar sustained that level of under performance for years until the mall was totally vacated in June.

“Ours went from distressed to more distressed,” he said.

He said Franklin County’s experience with Namdar is that, to date, the company has been hands-off in its involvement, but there are signs of that turning around. County development officials and Namdar have been in communications to discuss some mixed-use redevelopment ideas at the site, which is situated north of Chambersburg along Interstate 81.

“We’re hopeful that’s an indicator,” Ross said. “They’re going to have to invest to make that happen.”

How it got here

Frazer initiated the sheriff’s sale process earlier this year because Namdar owed $11.5 million in special assessment fees on four properties: the mall building, the former Sears Grand building and two vacant commercial parcels nearby.

The special assessments are part of the 2002 tax increment financing plan for the Mills Corp. Development Project, which included the mall and some of its out parcels, known as the TIF district. Bonds were sold to investors, and those revenues were used to pay off infrastructure for the mall. The TIF plan depended on money from real estate taxes to pay off the bonds with interest, like a traditional loan.

When Namdar acquired the mall, the company, along with some other property owners in the TIF district, sought and were granted a reduced property assessment, which lowered the real estate tax revenue available to pay off the bonds.

This triggered the special assessments, which act as a mechanism to cover the deficit in the reduced amount of property taxes because of real estate assessment reductions.

None of the roughly $11.5 million will be retained by the township. It is sent to Wells Fargo to pay bondholders.

“We’re pleased that the payment was made, albeit at the last minute,” said Frazer’s attorney, Matt Marshall.

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