Bidding for DeSoto Square mall closes at $33.75 million

MANATEE -- The online auction for the 41-year-old DeSoto Square mall closed just before 3:30 p.m. Thursday, with the higest bid coming in at $33.75 million.

The bidding was suppose to end at 2 p.m., but the online auction kept getting extended as bids kept coming in.

Hernando de Soto himself couldn't imagine such a voyage.

When Ed DeBartolo Sr. christened plans for DeSoto Square, it was destined for dominance in Manatee County. Now on its third owner, however, a fourth one could be at the helm this week, navigating the mall through stiff competition, empty storefronts and a sudden burst of tenants.

The 580,325-square-foot mall is up for auction, which started Tuesday, but there will still be uncertainty after the conclusion of bidding Thursday.

Auction.com will begin taking bids Tuesday with a minimum bid of $9 million. Bidders have to deposit at least $25,000, plus there is a buyer's premium of 5 percent of the purchase price. Rockwood Real Estate Advisors in New York is representing owner Mason Asset Management in the sale.

Originally built by former San Francisco 49ers owner DeBartolo in 1973, the mall was relatively stable for 30 years as its ownership transitioned to Simon as part of a DeBartolo Realty Corp.-wide deal in 1996. Simon, under its own transition and reconsideration of its portfolio, dumped DeSoto Square as it let the mall slip into the foreclosure process by the next move in 2012.

Mason Asset Management of Great Neck, N.Y., came along to take over the mall in November 2012, buying it for $25 million. The company inherited a mall that had seen several key retailers, including Old Navy and Foot Locker, leave after Dillard's closed in 2009. But Mason president Elliot Nassim told the Herald in 2012 he believed the mall could be turned around, promising to "roll up our sleeves."

Mason Asset did not return a call seeking comment for this story. But mall general manager Richard Bedford said the company has put in the work.

"The ownership is looking to take advantage of a good market. If the ownership gets their number, they will sell. Otherwise, continue to run it," Bedford said.

Still, little activity to woo retailers took place until the last few months.

The mall added a Hudson's Furniture store this year in the former Dillard's, filling the largest vacant space in DeSoto Square. It also was able to have J.C. Penney renew its lease this year. More recently, T-Mobile moved from a kiosk to a storefront, and several locally owned retailers selling discount items have quickly opened leading up to the auction.

Saturn 5 Family Entertainment Center will open up a game room superstore near Macy's, selling used billiards tables and arcade consoles. A discount store selling household items and clothes will open up soon across from GameStop.

That activity accounts for 120,000 gross leasable square feet of space back on the rent roll, Bedford said.

"Sounds pretty viable to most business people," he said.

Not everything was on the up-and-up inside the mall during a recent visit, though. Jenny's Wigs & Beauty shop has a stop order sign posted from Manatee County Building Services for doing improvements without a building permit. The store demolished part of a wall so it could expand into the vacant Foot Locker, according to the stop order.

A couple storefronts that had merchandise behind them appeared to be shuttered, but it's unclear if they are closed for good or only open for limited hours. For certain, the mall showed 15 vacant storefronts without any sign a new tenant is coming. One of them includes the 11,000-square-foot space that was home to Boater's World and a short-lived CrossFit gym.

When the 15 vacancies combine with three unoccupied spots in the food court, the emptiness is a stronger visual presence than a 5 percent vacancy on a spreadsheet.

The mall also installed two new entrance signs, but Magee Sign Service filed a lien July 3 against the mall for owing $22,059 of the $62,059 bill for the signs.

A new owner, if there will be one, will also have to contend with a more robust retail market along Cortez Road, plus an 880,000-square-foot, upscale Mall at University Town Center scheduled to open Oct. 16 off of Cattlemen Road and University Parkway. The two malls share a few duplicate tenants, such as Champs, Sunglass Hut and Bath & Body Works.

Public sentiment, resentment

Sifting through online comments, the community isn't thrilled about DeSoto Square mall and can't wait for it to be something else, or at least something better. Readers posted on the Herald's website that they would like to see office space there, maybe a call center, turn it into an entertainment venue or water park, or bulldoze it.

Expectations should be tempered, however. The auction is considered "non-absolute," meaning regardless of the winning bid, Mason Asset Management doesn't have to turn over the keys if it doesn't want to. Plus, because the auction isn't a bankruptcy sale, it limits alternatives and prospective buyers.

"Most of the mall auctions that have taken place have been for projects in bankruptcy -- and are completely or nearly empty," said Faith Hope Consolo, chairwoman of the retail group for Douglas Elliman Real Estate in New York. "That opens the buyer pool to people who will tear it down and do something completely different -- residential, a warehouse, whatever.

"DeSoto, however, has a lot of tenants -- the auction piece claimed it is 95 percent, but some reporting indicates more vacancy than that," she continued. "Still, it's a viable retail project, and a retail company likely will buy it. In a way, the fact that it isn't in bankruptcy reduces the buyer pool."

Retail experts told the Herald at the International Council of Shopping Centers Real Estate Convention in May that DeSoto would need to address security and safety perceptions to win back customers and tenants, as well as look for ideas beyond retail to make the shopping center successful.

Kyle James Fox, who operates three Cellairis cell phone repair kiosks in the area, wrote on the Herald's website that his DeSoto Square location is the most profitable, but ownership of the mall needs to be more attentive.

"The roof leaks still and has been for a while. Heck, just paint the front doors and it will seem a million times better. I feel like I need to get a tetanus shot every time I open the front doors," Fox wrote.

Still, it is better for the mall to keep going.

"It's a good mall, people just need to believe it is rather than be negative towards it," Fox wrote. "Imagine all the jobs it would create if it was redone and cleaned top to bottom and new retailers were brought in. More money spent at stores means more hours to give to employees, which gives them more money to spend around the area."

Prospective buyers?

The type of companies that are in the market to turn around malls include two Ohio firms, Glimcher Realty Trust of Columbus, and DDR, located in a Cleveland suburb.

DDR has completed 53 redevelopment projects since 2011, with a net investment of $287 million, according to its website, and was the top public buyer of power centers in 2013, spending $2.3 billion on acquisitions.

One of its recent projects was a four-phase redevelopment of The Fountains in Plantation. The 496,071-square-foot shopping center went from 88 percent occupancy to 98 percent occupancy, according to the company.

Among the properties it owns locally are Creekwood Crossing in East Manatee, Lakewood Ranch Plaza and Cortez Plaza, just down the street from the mall, where a Publix was demolished and construction of LA Fitness started this week.

Glimcher Realty has two Florida properties -- the upscale WestShore Plaza in Tampa and the Merritt Square Mall on Merritt Island. The company acquired the remaining 60 percent indirect ownership interest in WestShore in June.

The Merritt Island mall is a smaller version of the Mall at University Town Center, featuring more than 90 specialty stores, six anchors, 810,500 square feet and several full-service chain restaurants.

Glimcher lists its acquisition criteria as class A enclosed malls that have occupancy at 90 percent or above. Class A malls are those considered dominant in a metropolitan market with retail sales of $400 per square foot or more, and real estate analysts consider DeSoto as having slipped from those benchmarks in recent years.

A Glimcher representative did not return a call seeking comment.

It would be kind of neat to see the mall come full circle, Hope Consolo said, if Ed DeBartolo Jr. would acquire the mall through his company, DeBartolo Development, since his late father was responsible for building the mall.

DeBartolo Development also did not return a phone call.

Prospective future

One common suggestion by readers is to see the property turned into a social services hub. That's something Michael Saunders & Co. commercial real estate agent Ben Bakker would like to see, too.

Bakker would like to see if there's a way to concentrate services like the Salvation Army, Bill Galvano One Stop Center and other social services at the mall because it's centrally located, between U.S. 41 and U.S. 301 and across from the Manatee County Sheriff's Office and MCAT transfer station. He doesn't know if it's feasible but says it's worth a discussion.

"When you think about the continued discussion of downtown and continued transformation of Bradenton into this hip city -- that we're well on our way to doing -- I think we all can agree that every single city in America and the world is going to have a homeless problem," Bakker said. "It is inevitable, and I think every city and community should plan to deal with its homeless population in the most loving and caring and productive way."

Despite some negativity surrounding the property, DeSoto can still be successful as a shopping center.

DeSoto has a self-reported net operating income of $4.8 million and could use a little imagination and elbow grease to turn it around.

"It requires cleanup, more security and probably demolishing parts of the project to open it up more," Hope Consolo said. "Adding services would help, too. This will go to a private buyer who will then hire a turnaround specialist. Bergen Mall (in Paramus, N.J.) was a disaster until it was turned inside out, outfitted with boxes such as Century 21 and now is very successful."

Charles Schelle, Herald business reporter, can be reached at 941-745-7095. Follow him on Twitter @ImYourChuck.

This story was originally published July 27, 2014 at 12:00 AM with the headline "Bidding for DeSoto Square mall closes at $33.75 million."