COLERAIN TWP., Ohio — For the third time in five months, an ownership change is shifting the landscape at Northgate Mall.
The Tabani Group, a Dallas-based real estate investor that paid $21.4 million for the mall in 2012, surrendered a 9-acre parcel to lenders in a “deed in-lieu of foreclosure” transaction on Feb. 7, according to Hamilton County records.
The transfer follows the December closure of XScape Theater, which sits on another 9-acre parcel that owner Patoka Capital has listed for sale.
And it follows the September purchase of the former Northgate Sears store by Colerain Township, which is hoping to use the $2.2 million investment as leverage to bring a mixed-use development to the 60-acre site.
Township Trustee Dan Unger, who voted against the purchase, said Colerain should look for a way to sell all three parcels to a single buyer willing to redevelop the site.
“Chaos creates opportunity,” Unger said. “I would love nothing more than to get it in the hands of a private investor and out of public ownership.”
But other township officials see the changes as a validation of Colerain’s strategy to claim an ownership stake in the rapidly deteriorating property.
“We bought it as an opportunity to take control of what we view as the heart of our community,” Township Administrator Jeff Weckbach said. “These things take time and we have to be willing to be patient to get the project done in the right way.”
Mall makeovers
The I-Team is following the progress of mall makeovers this year because they represent billions of dollars in economic potential that won’t be realized unless the communities that nurtured these retail hubs over decades find a way forward with the real estate.
It’s a puzzle that Colerain is trying to solve along with Clermont County’s Union Township and the cities of Middletown, Forest Park, Fairfield and Springdale — all thanks to downward slides by Northgate Mall, Eastgate Mall, Towne Mall and Forest Fair Village:
- In Springdale, a Texas developer who proposed a billion-dollar makeover for Tri-County Mall is now negotiating with lenders to stay involved in the project after defaulting on a $28 million loan.
- In Middletown, the city considered a 2022 purchase of land to spark redevelopment of Towne Mall before opting instead to partner with a Dayton developer on the Renaissance Arena District at a 50-acre site one mile away from the mall.
- In Forest Park and Fairfield, the demolition of Forest Fair has been delayed while the cities negotiate an incentive agreement with Hillwood Construction Services.
- And in Union Township, trustees hired a planning firm to guide the “repositioning” of Eastgate Mall by its new owner, Hull Property Group.
Colerain Township took a more aggressive step in September when it partnered with the Port of Greater Cincinnati Development Authority to buy the former Sears store in a bankruptcy auction.
In other mall makeovers, local governments are promising zoning changes and tax breaks to developers. But Colerain is acting more like a developer, investing tax dollars to have more control and generate an investment return for taxpayers.
“We met with residents, interest groups, businesses and a number of nonprofits that are located in our community,” Weckbach said. “And the number one thing that kept coming up was a need for a central space for our community as well as a need for a redevelopment of the entire Northgate Mall site.”
Built in 1972, the 1.1 million square foot mall was already threatened before the pandemic accelerated its demise. In 2020, an I-Team analysis showed Northgate was the region’s third-most endangered mall with no retail anchors and 24 vacant spaces.
Four years later, the mall is down to 37 tenants, many of which aren’t open during its normal business hours of 10 a.m. to 8 p.m. Starting March 1, the mall will reduce hours to eight per day, 11 a.m. to 7 p.m., said Kirsten Lambert, assistant property manager.
The Tabani Group did not return calls seeking comment. But regulatory filings for one of its commercial mortgage-backed securities loans show a worsening financial condition for what was once the best-performing section of the mall.
After Dillard’s department store closed its Northgate store in 2009, Tabani lured a group of five big box retailers to the building. HH Gregg closed in 2017 and Marshalls left in October.
Last July, the building’s $8.6 million loan “was transferred to special servicing for imminent default,” one CMBS loan filing states. “Borrower has stated they will cooperate with turning over the property to lender ahead of the 2/6/24 maturity.”
Hamiton County records show the Tabani Group signed the property over to a corporate affiliate of LNR Partners, a Miami-based special servicing firm, on Feb. 1. LNR did not answer questions about its plans for the property.
The transfer means Tabani now owns less than half of the 60.4 acre mall site, with fewer than a dozen national retail chains to bolster its finances. And that has led some to question the wisdom of Colerain Township’s investment.
“I think it’s kind of risky and this is not the right time,” said George Brunemann, a township resident and Republican candidate for Ohio’s 29th House District. “It would be great if it succeeds. I mean everybody loves to pick a winner. It’d be great if the Bengals made it to the Super Bowl too. But there’s a lot of stuff that gets in the way.”
Pros and cons
A Trump supporter who traces his political roots to the 2009 Tea Party movement, Brunemann has criticized the township’s fiscal management in recent years. In fact, he’s voting against a police levy in March because he thinks trustees are seeking more tax revenue than they actually need for the department.
“The police levy in November went down without any opposition,” Brunemann said. “Nobody was opposed to it. It went down simply because the average homeowner can’t afford $400 a year in extra taxes.”
Because of higher property valuations, Brunemann argues the township will raise 5% more from the March levy that it would have received with the millage rate rejected by voters in November. So, he’s urging voters to reject the March levy too.
“To lose a levy and try and pass a higher one right after it just seems like nonsense,” he said. “And then to throw on top of it the fact that they just put out $2.5 million dollars for this property seems to be irresponsible.”
Colerain Township had an unusually high voter turnout of 48% in November, influenced by statewide issues on abortion and marijuana. That could make a police levy easier to pass in March. Beyond that, Weckbach argues the Sears purchase has nothing to with police funding.
“Our police department is funded solely by levies,” Weckbach said. “This purchase of this building was made with general fund dollars. They don’t cross-pollinate.”
Brunemann isn’t buying it.
“Money’s fungible,” he said. “I give you a dollar. It means you don’t have to spend a dollar somewhere else. So, I think that’s a false flag.”
Brunemann also disagrees with the township’s plan for recovering its Sears investment by creating a tax-increment financing district to capture property taxes from all new buildings on the 12-acre site. Weckbach estimates the township will eventually spend up to $3 million on its Sears investment, leading to at least $10 million in new real estate investments.
“Over a 30-year time horizon, with the modeling that we’ve put forward, a TIF on this site would likely generate over $4 million, and that’s a conservative estimate,” Weckbach said.
“Getting $4 million from a $3 million investment that (has) risk all around sounds like a bad move,” Brunemann countered. “I don’t know that most developers would take that bet.”
The case for staying the course
Weckbach said he’s heard that kind of criticism from residents, but he’s also been praised for his efforts by the Colerain Chamber of Commerce, which represents 250 member companies.
“Everybody can have an opinion about a large decision like this. It’s the informed decision that matters,” said Chamber President Dave Moravec, who also serves on the board of the Colerain Community Improvement Corp. “I think the trustees have done a pretty good job in doing their due diligence. I believe in their decision-making ability.”
The township expects to learn in April whether the state will cover the cost of demolishing the Sears store. It recently retained attorney Richard Tranter to analyze the mall’s operating agreements, which detail reciprocal easements that spell out how all of the mall’s owners can use their property.
Weckbach said those agreements could be the key to unlocking the mall’s future.
“Typically, the only individuals that have an opportunity to modify those agreements are partners to the agreement,” he said. “So, by us being an owner in the mall space, we’re now a partner to that agreement, which provides us with some flexibility to help control what can happen in the future and to move things forward.”
Before it owned the Sears store, the township rarely spoke to the Tabani Group. Since September, Weckbach has held several meetings remotely with the company’s executives.
“We’ve got better relationships with the different property owners here. And they’re different relationships now,” Weckbach said. “We’re able to talk a little more candidly about issues that are going on with the whole site and how we can rectify those. And we can have a better conversation about what the future looks like for this space.”
The township has done some preliminary planning about what the site could become. It’s also talking to developers about housing, commercial and retail ideas for the property. Weckbach hopes to launch a bidding process this year to invite development proposals for its 12-acre Sears site – and perhaps other parcels if their owners want to be part of the redevelopment.
“You’re going to see some public space. You’re going to see some green space. You’re going to see some commercial, some residential, you’re going to see some retail,” Weckbach said. “It’s going to be all those things that are going to make this really a center spot for our residents to flock to, just like they did when it opened and just like they’ve been doing for the past 60 plus years.”
