Recently, the owners of the defunct Orchards Mall again listed it For Sale, with an asking price of $7.5 Million dollars. Not surprisingly, there has been no immediate announcement of anything planned for the decaying property, now largely vacant for almost 15 years. The new asking price is roughly double the ‘Three Million plus’ number that had been estimated several years ago as a starting point to talk about the future of the mall.
To get some perspective, MoodyOnTheMarket.com sat down with the man most successful at redeveloping retail properties In Benton Township over the past 20 years. Jim Paul led the efforts that resulted in redevelopment of Fairplain Plaza and several nearby retail strips. Those buildings, some virtually abandoned for a time, now house Kohls, Hobby Lobby, Dunham’s Sports, Ollies, HomeGoods, TJ Maxx, Michaels, PetSmart and several other stores.
Paul also spearheaded the resurrection of the long-vacant Jewel/Osco store on Napier Avenue that now is home to Slumberland Furniture. He is currently working on re-purposing the former Texas Corral/Red Lobster restaurant on Pipestone Road on the edge of the Orchards Mall footprint. From our observation, no one knows more about what is possible in Benton Township commercial real estate than Paul.
So… what does Jim Paul think about $7.5 Million as a starting point at the Orchards Mall?
“You can ask anything you want,” Paul told us, “But if I was actively trying to redevelop that site, I could see someone paying up to $2 Million for iit. Not much more.” Paul says the mall math isn’t that complicated. Anyone buying the 63-acre site would have to spend at least another $3 Million, probably more, in demolition and preparation costs before anything else can be built there. Add to that at least $500,000 in back taxes owed to Berrien County. Those must be cleared before anything can happen.
So, before spending a dime on their new vision at 1800 Pipestone Road, the next owner would have well over $5 Million invested in what would then be a big empty lot with great road access and public services, utilities, etc. readily available. At the $7.5 Million price, that ‘ready-to-break-ground’ number would be closer to $11 Million Dollars.
Paul also points out that ‘time is money’ and the lead developer of a reimagined former Orchards Mall space will need at least a year and likely more to do the planning and ‘due diligence’ necessary to first attract, and then to sign contracts with retailers or other potential tenants. The transfer of the property to a new developer would be just the beginning of the process. That time element is another factor in the price equation working against the sale at any number approching the current asking price. There are too many other places for investors to put their money with a much quicker and more likely return on their investment.
Local consumers and taxpayers often comment on social media about the Orchards Mall, and they did again recently when the $7.5 million story came out. They yearned for a local Costco, Sam’s Club, Menards or Target store as opposed to the one to which they regularly travel to shop.
Paul said that while it’s possible one of those stores might decide to locate here in a specific deal, it’s unlikely, because the local market is already covered in the radius of those South Bend, Kalamazoo and Michigan City Big Box stores. Every day Berrien County consumers make the trip to shop at those stores, so the giant retailers are unlikely to be building a store here. They simply don’t have to.
On the other hand, Paul points out that specialty stores would be great prospects for any type of Orchards Mall redevelopment. He points to HomeGoods, Hobby Lobby and Tractor Supply, which all opened new stores in the neighborhood in the past year. Others are out there, but none can, by themselves, make anything happen at the gigantic Mall location. A ‘lead developer’ must do that. But, as explained earlier, no one is standing in line at prices even close to what Durga Property Holdings, the owner since 2018, is asking for the site.
We have heard suggestions that the Mall site should be ‘broken up into bite size pieces’, making some of those specialty stores more likely to proceed. Paul said that would be reasonable, however it still requires a ‘master developer’ to initially acquire the distressed property, clean it up, draw the new ‘lot lines’ and find the retailers ready to expand here.
An examination of Durga Property Holdings track record makes it clear that they are not in that realm. They buy distressed properties, hold them and eventually flip them. Unfortunately, each year their number to successfully exit increases as they pay delinquent property taxes at the last moment before County foreclosure processes begin. How the new $7.5 million asking price changes that is entirely unclear, considering all the background provided to us by Fairplain developer Paul.
Our discussion with Jim Paul, however, also included interesting ‘what-if’s’ about the Orchards Mall site, based on his observations of successful retail resurrection projects in other states. We will explore those possibilities in another MOTM article later this week.
By Gayle Olson, MOTM Contributor
