Traverse City's original shopping mall is hitting the auction block – and at least one major development company has confirmed its intentions to bid on the property.
The Cherryland Center, a 167,605 square-foot shopping mall built on 16 aces in 1976 at the corner of Garfield and South Airport roads, is slated for sale by auction on September 10. The property, which was converted from an indoor to an outdoor mall in 1999, has a handful of major retail tenants in Younkers, Big Lots, Sears and Kmart (the latter two of which are independently owned), but has struggled to maintain relevancy in recent decades due to increased retail competition and consumer flight from east Traverse City to the west and downtown.
Todd Wyett, principal at the Southfield-based real estate development firm Versa Development, which owns MC Sports in Traverse City, confirmed this week his company is registered to bid on the project. The Cherryland Center has sat in receivership since 2010 after previous owner Schostak Bros. defaulted on its mortgage to Wells Fargo Bank.
“There are challenges there...it needs some TLC,” Wyett says of the property. “You have to be a cash buyer, which we are, so you don't have a bank breathing down your neck, and you have to use that cash to invest in development and convince mom-and-pop tenants to locate there.”
Wyett theorizes the customer base for the property could strengthen in coming years as neighboring industrial activity in Garfield Township edges further out of the city and is replaced by residential and mixed-use developments. Noting that “almost all of the big national chains are already here in Traverse City,” Wyett says his company would focus on recruiting smaller-scale and local retail tenants to the mall.
The minimum starting bid listed on the property is $1,250,000, though local commercial real estate agent Kevin Endres, owner of Three West LLC, predicts the development could potentially go “for a few million.” Endres says the center is beset with challenges – but also offers some “great opportunities” for the right buyer.
“Traffic is a major issue – Garfield and South Airport are basically freeway corridors, making it difficult for customers to get in and out of those businesses,” Endres says. “But if they alleviate that issue, there will be a demand for more good retail space over there."
Endres also points out the enormous square footage and acreage of the property will allow an investor to claim retail space for “pennies on the dollar” of the normal going market rate. While the average price per square foot of retail space sold in Grand Traverse County was $65 in 2012 and (as of August 1) $81 per square foot in 2013, the Cherryland Center is only expected to command an estimated $10-$20 per square foot at auction.
“That's a ridiculous price,” Endres says. “Someone will be in a very good spot with that deal.”
Endres speculates another advantage could arise if retail tenants currently located at the Horizon Outlet Center need to seek alternate housing in the future, a market segment the Cherryland Center would be primed to absorb. The future of the US-31 outlet mall has been in limbo since it was sold at auction in fall 2012 to TC Partners LLC, owned by local developer Jerry Snowden. (Snowden, another possible bidder on the Cherryland Center based on his development and acquisition history, declined to comment on his interest or the future of the Horizon Outlet Center but said of Cherryland: “The demographics are strong for the area, the location is fair, the median income and number of rooftops look good. But, most retailers still want to be over by the Grand Traverse Mall.”)
Stan Tornga, a senior associate at Three West who oversees leasing management at the Cherryland Center, says the mall currently has close to an 80 percent occupancy rate and is leasing at an average rate of $11 per square foot, plus utilities and maintenance fees. He calls the property “a well-maintained, attractive center in a reasonably good location” and offers advice for potential buyers.
“The best thing to do would be lower the rates and get tenants in there who would make it a destination center, who would attract customers for multiple visits a week,” he says. “If you can do that, you can make that location competitive again.”