It's a fascinating time for retail in Traverse City. The town's largest shopping center is struggling to fill empty spaces, the outlet mall will be auctioned to the highest bidder on September 25, and Traverse City's oldest mall remains in receivership with an unknown future.
The economic downturn has hit Grand Traverse Mall hard. During its late 1990s heyday, when retail was booming, Grand Traverse Mall consistently posted occupancy rates at or above 96 percent, with strong demand from large chains and local shops alike. Today that number has dropped to 82 percent. Following the bankruptcy of former owner General Growth Properties (GGP) and a spinoff group that purchased several of GGP's former malls, the mall today is owned by publicly-traded Rouse Properties.
A source close to the mall's ownership and operation calls the current occupancy numbers "staggering" – especially in light of the strong occupancy of the past. Numbers for regional malls nationwide however around 91 percent, according to commercial real estate data provider REIS.
Observers say one reason for the drop is that Grand Traverse Mall was built on the premise of a 22-county customer base, but cities like Gaylord and Petoskey now have their own big box retailers.
On September 25, the highest bidder will take ownership of Traverse City Outlets, formerly Preferred Outlets and, later, Horizon Outlet Center. The center will be auctioned online. The minimum bid accepted: $1 million.
In 2010, the outlet mall's owner, Williamsburg, Va.-based Ariel Preferred Retail Group, was dissolved after it and its parent company, Prescott Capital Management, defaulted on an approximately $90 million loan. Woodmont Company of Fort Worth, Texas, then took over management of the property. Current occupancy is pegged at 52 percent.
Local developer Jerry Snowden made an offer to purchase Preferred Outlets in 2008, but the deal was never finalized. Snowden would not comment on the mall's impending auction.
As for Traverse City's first mall – Cherryland Center – it remains in court-ordered receivership after Southfield-based Schostak defaulted on its mortgage in 2010. McKinley, a property management company, has been managing the property on behalf of Wells Fargo Bank, the lender.
One year ago, Big Lots took over the former Tom's Market space, but Cherryland Center still has many vacancies, including the former site of Chinese eatery King's Buffet, which closed last month.
Garfield Township, where all three shopping centers are located, is feeling the effects, says Township Supervisor Chuck Korn.
"Obviously they are a big part of our commercial tax base and our community," he says, noting that combined, the three centers make up approximately 5 percent of the Township's overall tax base.
Meanwhile, according to Downtown Traverse City Deputy Director Rob Bacigalupi, downtown Traverse City "is definitely on the upswing." He says downtown occupancy is at 98.3 percent.
"We have focused on local businesses and creating a unique shopping experience," he says. "This kind of shopping experience, we believe, is what both visitors and locals appreciate about downtown."