'Value is in the land': West Dundee looks to buy Macy's spot with eye on redeveloping Spring Hill

Once a popular regional destination, Spring Hill Mall sits largely vacant.

Four main retailers - Barnes & Noble, Carson Pirie Scott, Macy's and Sears - have closed in recent years, leaving only a Kohl's store and Cinemark theater anchoring the enclosed mall. Smaller tenants have fled to the Randall Road corridor. West Dundee officials estimate only about 25% of the mall's storefronts are filled.

Village trustees hope to find a developer who can reinvent the shopping mall. But officials want to remove some of the roadblocks first.

On Monday, the board is expected to vote to buy the empty Macy's department store and the 8.6 acres on which it stands for $1.25 million. Officials say the 43-year-old building is obsolete and will likely be demolished.

"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," West Dundee Village President Chris Nelson said. "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."

Suburban indoor malls are facing a similar reckoning. Lower-performing malls anchored by Sears and JCPenney have struggled the most, while the more upscale shopping centers have been able to survive and fill vacant space, said John C. Melaniphy, president of the Chicago-based retail consulting firm Melaniphy & Associates.

But none of the regional malls have emerged unscathed by the e-commerce boom.

"I think that all of these malls in the Chicago metropolitan area and around the country are going to have to be re-imagined. Generally, it's good real estate," said Melaniphy, pointing to their transportation infrastructure and proximity to interstate highways.

Mall operators are carving out more space for housing and entertainment to generate foot traffic. Northbrook Court owners have proposed replacing the now-demolished Macy's site and empty parking areas with a residential mixed-use neighborhood. Centennial Real Estate, the owner of Fox Valley Mall in Aurora and Hawthorn Mall in Vernon Hills, has torn down former anchor stores to make room for outdoor plazas and hundreds of apartments.

Earlier this year, West Dundee trustees created a new tax increment finance district encompassing Spring Hill Mall to entice developers with property tax money above a certain level that would be steered into redevelopment. The mall opened in 1980.

"In some situations, municipalities have to take drastic actions in order to initiate a redevelopment," Melaniphy said. "They can do that with some of the incentives and so forth."

Including Macy's, four different companies own properties at Spring Hill Mall. The largest portion of the mall, which includes the interior and the Carson Pirie Scott building, is owned by New York-based Kohan Retail Investment Group. Macy's owned its own building, and the Sears building is owned by Transformco, which took over some of the Sears assets.

Reached by phone on Friday, a representative for Kohan declined to comment.

Village officials say buying Macy's not only helps untangle the complex web of mall ownership issues but also gives West Dundee a greater say in the mall's rebirth.

"Acquisition of Macy's is a huge first step going forward," Nelson said. "It allows us to be an owner and a stakeholder in this process."

Nelson does not want to see empty space repurposed for exotic car storage, paintball or other similar uses that have been suggested. Rather, he envisions a carefully planned, mixed-use development that incorporates housing along with some retail and entertainment. Something that looks less like a "sea of asphalt with a building in the middle" and more like a neighborhood.

"This is an area that is in the center of town, and there is a lot of residential around it," he said. "We feel it's incumbent upon us to get this right."

There is currently no proposal to re-use the 123,000-square-foot Macy's store.

"My expectation is that we'll have to demolish the structure; the value is in the land," he said.

Though he could not comment on the remainder of the mall or if the village will be buying any additional property, village officials earlier this year presented a $72.7 million TIF budget that set aside $45 million for demolition and infrastructure costs at the mall and $3.5 million for property acquisition costs.

A June 2023 closing is expected on the Macy's property.