As more tenants leave, Pittsburgh Mills mall coming up empty in search for turnaround
Paul Boyle says moving his home furnishings business from Oakmont to the Pittsburgh Mills mall in 2016 was a good decision.
“This mall has afforded us the ability to grow,” he said. “We’re really quite happy here.”
While Boyle says his loyal customers followed him to the mall in Frazer and he’s found new ones there, he has noticed a reduction in traffic, both at his business, Home Collection, and others.
Getting people into the mall is a struggle, especially when it has so many empty storefronts and many people who visit its anchors, such as Macy’s and JC Penney, never set foot in the mall’s hallways.
“Like everybody says to me, ‘We need more stores,’ ” Boyle said. “I agree. If the selection was larger, there would be more interest in the mall.”
Frazer Supervisor Lori Ziencik said the mall has been status quo since it remarkably “sold” for $100 at a foreclosure auction in January 2017. In reality, mortgage holder Morgan Stanley Capital took possession of the property.
Ziencik said the township, which has its municipal and police offices inside the mall, would like to see it put up for sale “so that we can move forward.”
“Right now, we’re at a standstill,” she said.
Jones Lang LaSalle is managing and leasing the mall. A JLL representative declined a request for an interview.
Mall general manager Ernest Diaz touted recent store additions, including Extreme Health Consultants, a cycling and spinning studio; the Amish Store, which offers specialty packaged-food items; Shop Off the Hanger, a clothing and shoe store; and Glass Noodles, a food court eatery.
“We are continually working to enhance the offerings at Galleria at Pittsburgh Mills to serve the needs of the local community,” he said in an email.
Despite some recent additions, the mall’s occupancy is declining, with 23 tenants leaving since January 2016, according to a January 2018 report by New York City-based Trepp LLC, which provides market research for the real estate and banking industries.
Negotiations were under way with a tenant to fill the 21,500-square-foot space once occupied by ITT Tech, which closed in September 2016, according to Trepp.
And the mall is being prepared to be put on the market for sale, Trepp’s report states.
Obstacles for turnaround
Turning the mall around will be difficult, said Edward Dittmer, senior vice president of Morningstar Credit Ratings.
The mall never achieved its expected $10.4 million cash flow, Dittmer said.
Its value has plummeted, from $190 million in 2007 to $30.8 million in 2015.
In recently challenging the mall’s assessment, Morgan Stanley has argued it’s now worth $10.1 million. The appeal is pending in court.
“The reality is that when you have a mall that’s reached this point, where cash flow is down and occupancy is down, it’s rare that a mall is able to turn itself around and become a vibrant center again,” Dittmer said. “The end result is often the property gets bought by a distressed property investor who will then try and either develop the property or do something with it.”
With bondholders facing a loss of more than $120 million when the property does liquidate, Morgan Stanley isn’t going to invest in it, Dittmer said.
“The lender is not going to invest in this property,” he said. “They may not see a return on that money. They may increase their exposure by investing more cash in it.”
Mall management gets credit
But Boyle said the mall is being maintained, and “everything is good.”
Boyle credited the mall with finding ways to pay its bills, such as leasing the former Sears Grand space to Netflix and bringing in tenants such as a church and gym.
Joe DiRenzo manages his family’s business, Top Hat Formals, which has survived at the mall since 2007.
He sees the mall’s problem as a chicken-or-the-egg scenario: shoppers won’t come without stores; stores won’t come without shoppers.
“Whoever ends up buying this mall, they’re going to have to have some vision and make hard decisions on what they’re going to do to reuse this property,” he said.
“I’m hopeful someone does buy the mall, someone with vision,” he said. “Anyone who buys the mall, they’re going to have to invest a lot of money to repurpose the mall. That’s going to be the best bet. There’s not a lot of growth in the retail sector.”
Ziencik said the township would like to see the mall become a multi-use center, with a mix of recreation, retail, offices and possibly housing.
“Somebody would have to have a vision to make it what the trend is across the country,” she said. “We don’t know if that’s even possible until they put it on the market.”
Brian C. Rittmeyer is a Tribune-Review staff writer. Reach him at 724-226-4701, [email protected] or via Twitter @BCRittmeyer.