Locally based Kite Realty Group Trust is exploring selling or redeveloping Glendale Mall, the company said in its annual 10-K filing with the U.S. Securities and Exchange Commission.
Those are among "several strategic alternatives" Kite is considering for the north-side shopping center, according to the March 30 filing, the most definitive acknowledgement by Kite to date that its redevelopment of Glendale in 2000 never fully took wing.
Kite bought the mall in 1999 for $20 million and sunk another $11 million into a major overhaul of the property. The city chipped in $2 million for site and infrastructure improvements, but conditions of that grant didn't include any restrictions on future use of the property.
A Lowe's Home Improvement store and Kerasotes Theatre complex that were added to the mall's perimeter as part of the redevelopment have been successful, but Glendale's interior has been plagued by departing tenants and slow foot traffic.
The mall is 87-percent occupied, compared with a 95-percent occupancy rate across Kite's entire retail portfolio. Glendale's annualized revenue is $2.9 million, or 8.4 percent of Kite's total revenue from retail properties, according to the 10-K.
The 12-screen Kerasotes Theatre has enjoyed such success that it's looking to expand, said Mark Perlstein, a principal at locally based Linder Co. who represents the movie theater. Discussions are ongoing with Kite to accommodate the expansion, Kite officials said.
The disclosure about Glendale, at 724,000 square feet the largest of Kite's 39 retail properties, came in Kite's first annual SEC filing since going public last August. However, Kite has been examining options for Glendale for about a year, said David Lee, Kite's director of asset management.
That's when Kite hired Chicago-based General Growth Properties to manage and lease Glendale, counting on General Growth's national exposure to mall tenants and its relationship with traditional mall retailers to fill empty spaces at Glendale. The majority of Kite's retail properties are neighborhood retail and outdoor power centers, which typically attract different anchor tenants than enclosed malls do.
General Growth is still marketing the mall and aggressively seeking new tenants, Lee said.
But he acknowledged that Glendale's current situation can't last forever.
"We don't believe strategically we've captured the highest and best use for that property," Lee said.
Kite is signing any new deals with the possibility of redevelopment in mind, he said.
"Flexibility is the key to any deal we entertain," Lee said. New leases will include shorter lease terms or the option to move tenants in the event of redevelopment, he said.
Glendale's 49 acres sit at the intersection of Keystone Avenue and 62nd Street, both heavily traveled north-side corridors that run through some of the city's most densely populated neighborhoods.
"Glendale Mall is a great opportunity," said Bryan Chandler, principal of Eclipse Real Estate, a locally based retail brokerage firm. "The trick is realizing the opportunity. You can't find a more dense population base than you can around Glendale Mall."
That population is also relatively educated and well-paid, although the southern edge of Glendale's trade area has declined somewhat in recent years, Perlstein said.
From the time Kite purchased Glendale in 1999 from Chicago-based Equity Properties & Development LP, local retail developers have said the site's best use might be as a power center, with one or more big-box tenants anchoring the space.
Given the success of Lowe's, Kerasotes and outlot tenants such as O'Charley's and Walgreen's, Glendale's most promising future might be to reconfigure the site to keep those tenants as anchors, razing much of the mall building and building a strip center to accommodate new tenants, several retail experts said.
Kite hasn't excluded that option or any other, Lee said. Demand from tenants and shoppers will ultimately decide Glendale's fate.
"I don't think we can really take anything off the drawing board," Lee said. "It's in the best interest of our shareholders and our company to look at all redevelopment possibilities."
Glendale's location and the presence of Lowe's and Kerasotes could draw other big-name tenants to the site, retail brokers and developers said.
Minnesota-based Target Corp. in 2002 took a hard look at Glendale Plaza, a mostly vacant site across Keystone Avenue from the mall, for a SuperTarget. The retailer eventually decided to close its store at 53rd Street and Keystone Avenue and expand its Nora location on 86th Street. Target hasn't taken a fresh look at the site since, said Chandler, who represents Target locally. Glendale's anchors, along with Lowe's and Kerasotes, include L.S. Ayres and Old Navy. Anchor Lazarus left the mall shortly after Kite purchased it, followed by four stores owned by The Limited Co. in 2002. Kite filled the Lazarus space with Old Navy, Stein Mart, Staples and a branch of the Indianapolis-Marion County Public Library. Stein Mart closed its Glendale store last fall.
The future of the three-level Ayres store is also in doubt with the pending takeover of Ayres' parent company, St. Louis-based May Department Stores Co., by Cincinnati-based Federated Department Stores Inc. Analysts don't expect the Ayres name to survive the merger, but Federated could choose to rebrand the store as a Macy's or one of its other brands, they said.
Kite hasn't been notified by Federated of its plans for the Glendale location, company officials said.