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Urban malls improvise: Lafayette Square, others struggle in changing retail world

February 13, 2006

Lafayette Square Mall on the city's northwest side has all the marks of a decaying urban mall: Most major national retailers have fled, a church occupies a former department store space, and the surrounding neighborhood has fallen out of favor among shoppers and businesses.

But is the mall destined for a date with a bulldozer, as has happened with old malls in other cities?

Not everyone thinks so. Lafayette Square still has good access from Interstate 65, apparently committed ownership by locally based Simon Property Group Inc., and a location in an area poised for revitalization through incentives and a planned Wal-Mart SuperCenter.

"Lafayette Square, demographically, is fine," said Clint Fultz, a principal of Prime-Site Brokers and co-owner of a former Cub Foods building outside the mall that now houses a grocery store and movie theater. "It's just developed on an old retail model."

What's needed, Fultz said, is more redevelopment of outlots and parcels around the mall to focus on entertainment-oriented businesses, such as restaurants.

"Most malls today have a tremendous symbiotic relationship with restaurants," he said. "That was not the case in the '60s [when Lafayette Square was built]."

Occupancy at the mall was 87.1 percent at the end of 2004, the most recent numbers available. By comparison, average occupancy at Simon's malls was 92.7 percent at the end of 2004. Then, as now, Lafayette Square's anchors include Sears, L.S. Ayres, Steve & Barry's and Burlington Coat Factory.

A church occupies part of a former Lazarus store. A former J.C. Penney remains vacant, as does a closed movie theater on an outlot. Kittle's Rooms Express recently shuttered its store at the mall.

Some national retailers, such as Foot Lock- er and Bath & Body Works, occupy space in between the anchors, but a host of local and regional tenants, such as International Luggage and Charming Gold, fill many of the mall's smaller stores.

Simon officials said no announcements regarding Lafayette Square are imminent, but merchants in the area say the company is involved with community business groups focused on ways to revitalize the struggling retail corridor. It's also unlike Simon to admit defeat and throw in the towel on a property, retail experts said-although the company did just that with Eastgate Consumer Mall on the east side, which it sold to North Carolina investor Heywood Whichard. The former mall now sits vacant after Whichard's failed revitalization attempt.

If the fate of other malls across the country are any indication, the days of Lafayette Square as a traditional mall may be numbered. While urban malls continue to thrive in large population centers like Atlanta and Washington, D.C., smaller cities struggle to support such malls. Many are in neighborhoods that, like the Lafayette Square area, were once considered suburban but have lost highincome residents and the retailers that cater to them to newer suburbs farther from the city center.

In Kansas City, Kan., for instance, the Indian Springs Marketplace is now home to various civic and not-for-profit ventures, such as a minority business enterprise center, after several stalled attempts to breathe new retail life into the mall, including an effort to populate it with retailers catering to the city's Hispanic population.

Closer to home, Southtown Mall in Fort Wayne eventually was razed after Simon and other owners failed to revive it. Now the former mall site and the area around it is experiencing a retail rebirth, but with big-box retailers such as Wal-Mart and Home Depot instead of mall anchors like department stores.

In Hammond, city officials and owner Praedium Development Corp. are planning to demolish Woodmar Mall, opened in 1954, in stages and redevelop the land, probably as a strip center, The Times of northwest Indiana reported last week. Department store Carson Pirie Scott is expected to anchor the development.

National trend

Across the country, more and more urban malls are facing substantial changes, said Barry Pener, senior vice president of Kansas City, Mo.-based Harold Pener Men's Wear, which has one of its 31 stores catering to urban males at Lafayette Square.

"It's starting to happen more in middletier cities of Indianapolis' size," said Pener, who added the company has no plans to close its Lafayette Square store. "In large population centers like Atlanta and Washington, D.C., there are enough African-Americans in a city to support an urban mall."

The phenomenon of the urban mall puts Simon in a somewhat unfamiliar position. The company's 286 U.S. malls include some of the best-performing and bestknown centers in the nation, from the Forum Shoppes in Las Vegas and the Mall of America in Minnesota to premium outlet centers it gained through its 2004 acquisition of Chelsea. In Indianapolis, Simon's Fashion Mall at Keystone at the Crossing has consistently brought highend tenants, such as Pottery Barn and Tiffany's, to Indianapolis.

Rather than treating Lafayette Square like the ugly stepchild of its portfolio, however, tenants and neighbors say company officials are eager to work with them.

"It's a real working relationship with the Simons," said Deacon Steve Nelson, chief operating officer and chief financial officer of New Life Worship Centers Inc., a Lafayette Square tenant. "Their philanthropic philosophy seems to help us. It's been a good thing for both of us."

Since mid-2004, New Life has operated one of its three locations in the former Lazarus store at Lafayette Square. The church draws hundreds of worshippers every week to the mall, filling the parking lot and providing an estimated 15,000 extra shoppers at the mall each month, Nelson said.

New Life recently worked out a deal to purchase Traders Point Christian Church at 7860 Lafayette Road, but has no plans to close its mall location when it moves to Traders Point later this year, Nelson said. In fact, the church is working on expansion, taking up the entire 40,000-square-foot first floor of the former Lazarus store and building an entrance linking the church with the inside of the mall. New Life eventually wants to expand into the second floor of the former Lazarus.

Rent at the mall is "very affordable," Nelson said, but the church pays for most improvements to its space, such as restriping the parking lot, landscaping and interior renovations. The church will spend more than $400,000 on its expansion.

The Wal-Mart effect

Like others in the Lafayette Square area, Nelson said he sees nothing but opportunity for the northwest-side corridor around the mall. The city of Indianapolis has been upgrading major roads in the area, and a Community Revitalization and Enhancement District announced in 2004 promises to send tax money collected in the district back to the area for redevelopment efforts.

The district's biggest success thus far came from Wal-Mart Stores Inc., which late last year firmed up plans to build a Super-Center near the Lafayette Road and Interstate 65 interchange, just north of the mall.

It may take a few years to realize the benefits of the SuperCenter, slated to open in 2007, but they will come, Fultz said. Not only will some new businesses want to locate in the area to tap into the traffic generated by a Wal-Mart, but the store, through its sales and payroll taxes, will generate more money to be funneled back into redevelopment efforts, he said.

Like other business owners and landlords, Simon will be able to apply for some of the CRED money should it choose to rehab or redevelop Lafayette Square.

Despite the traffic and interest Wal-Mart will generate, it still doesn't change the fact that most retailers will continue to pick newer suburbs such as Avon and Plainfield over 38th Street and Lafayette Road, said Brian Epstein, principal of Indianapolis-based Urban Space Commercial Properties.

Whether it happens sooner or later, Epstein said he predicts big changes in store for the mall, such as redevelopment of the outlots around the mall, which now include a shuttered movie theater, closed retail stores and mechanic's shops, or demolishing all or part of the mall in favor of more free-standing big boxes.

"I don't think Wal-Mart is going to be the savior of the west side and Lafayette Square," he said.
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