Radical course: What two villages are doing to transform beleaguered mall properties

A year before West Dundee officials bought a shuttered Sears, a developer wanted the building for an indoor paintball park.

The developer was close to inking a deal with Sears when town officials learned of the idea, Village President Chris Nelson recalled. A paintball facility was not what they envisioned for a former anchor of Spring Hill Mall.

“That was a critical moment,” Nelson recalled, adding that bringing in additional property owners at the mall would hinder the redevelopment the village pictured. “We realized we were quickly running out of time to intervene in a positive way.”

That intervention resulted in the village buying the shuttered Sears and acquiring a former Macy’s at Spring Hill Mall, which straddles Carpentersville and West Dundee.

In October, village trustees agreed to spend $7 million to buy the rest of the mall from Kohan Retail Investment Group. The move would not include a Kohl’s store that remains open. They anticipate closing the deal by the end of February, Nelson said.

A village buying a beleaguered mall is a “radical move,” says John Melaniphy, president of Melaniphy & Associates, a Chicago-based firm of retail and shopping center consultants.

Most communities go the traditional route of offering tax incentives to entice private developers to buy and redevelop mall properties.

But with anchor retailers closing, online shopping taking a larger share of purchases, and other developments attracting typical mall stores, some towns are charting a different course as once-vibrant malls decline.

The village of Bloomingdale spent years trying to partner with Namdar Realty Group, the company that owns Stratford Square Mall. When those efforts failed, the village went to court to force Namdar to sell the nearly deserted shopping center at Gary Avenue and Schick Road.

Last Monday, Bloomingdale trustees agreed to settle the condemnation lawsuit against Namdar. The village now plans to spend $8.75 million to buy the remainder of the mall.

Bloomingdale previously purchased the former Carson Pirie Scott, Burlington and Sears stores, along with a strip of land commonly known as the “canoe” property along Springfield Drive.

“I think relative to the amount of land that we have acquired and the cost, it is an amazing start to a new rebirth at Stratford Square Mall,” Village President Franco Coladipietro said Monday.

West Dundee and Bloomingdale officials have similar visions for the mall properties in their towns.

West Dundee sees a mixed-use development with residential, office, retail and entertainment. Bloomingdale’s consultants have drawn up conceptual plans showing residential, commercial and recreational development in place of the mall's former retail buildings and parking lots.

Typically, villages stay out of the real estate business and leave redevelopment of retail centers to developers. But for West Dundee and Bloomingdale, taking ownership of their malls and clearing some obstacles, such as multiple property owners or restrictive covenants, were deemed essential for future redevelopment.

"Almost uniformly, every developer with whom we spoke stated that the site has too many complications ­— too many owners, too many covenants, too many uncertainties," Nelson said last year. "The village's aim is to bring simplicity to the process so reliable developers with established track records will be interested in partnering to reformat the area. Without municipal intervention, that simply won't happen."

Melaniphy said finding the right developer to execute each village’s vision is key.

“The real estate development business is fraught with risk and developers navigate risk all the time,” Melaniphy said. “That’s what they’re good at and that’s why, in many cases, I recommend that municipalities stay out of the real estate business.”

Bloomingdale officials have acknowledged there’s risk.

“We look at it as a calculated risk,” Coladipietro said last spring. “And we've done the due diligence prior to engaging in the purchase of the properties.”

At least one other suburban community has gone the same route, albeit on a smaller scale.

Elk Grove Village purchased the former Elk Grove Woods Plaza, a 10-acre retail center, and is working with Wingspan Development to transform the site into a mix of apartments, townhouses and retail buildings.

As for what will happen with the Stratford and Spring Hill mall properties, only time will tell.

“It’s going to be interesting to see what’s done with these malls once the municipalities obtain ownership,” Melaniphy said.