By Simon Jaronski, Staff Writer
Photo Courtesy of Unsplash.com
The golden age of shopping malls has long since passed, and Americans have transitioned to a more cynical form of consumerism. Today, Amazon and other online retailers have displaced the multi-faceted mall experience, complete with dining options, idle browsing, and socialization.
Unfortunately, dead malls do not serve merely as reminders of past optimism and grandeur. These gargantuan decaying structures pose serious problems for communities forced to deal with blight and a lack of tax revenue. The greater Pittsburgh region is uniquely affected by this problem, and two of its largest malls raise several thorny legal issues.
The most glaring example is Century III Mall, constructed on top of a former slag dump in 1979, and located just outside of Pittsburgh in West Mifflin, PA.[1] Century III was intended to serve as a beacon of opulence and middle-class comfort going forward into America’s tricentennial.
In 2019, Century III closed its door forever.[2] Since then, the vacant property (owned by Moonbeam Capital Investments LLC) has brought nothing but headaches to West Mifflin.[3] Amateur urban explorers flocked to the relatively unsecured property to explore and vandalize.[4] In June 2023, a minor fell through the roof and was critically injured.[5] Later that month, a hearing was held to formally condemn the property.[6] In July, a Magisterial District Judge fined Moonbeam $240,000 for the violation of several ordinances.[7]
Why did Moonbeam purchase Century III in 2013, well after it was clear that the mall was headed for disaster? Why do shopping malls still make up a significant portion of many REIT (Real Estate Investment Trust) portfolios?[8] For the malls that do continue to stay open, rent from mall tenants provides a reliable flow of income for investors. More often though, these companies act as absentee landlords with no real interest in bringing their properties back to life.
The Pittsburgh Mills Mall is another example of this phenomenon. The history of the Mills is rather complex, and can be traced back to the ambitions of real estate developers in the 1980s.[9] The mall first opened in 2005, and quickly began experiencing financial difficulty.[10] The surrounding infrastructure necessary to support the massive complex (including the addition of an exit on State Route 28 to facilitate traffic heading into the mall itself or the surrounding box stores and smaller strip malls) was paid for via Tax Increment Financing, a method designed to capture expected future increases in property tax revenue to pay back bonds issued to fund the initial development.[11]
In 2017, Wells Fargo Bank foreclosed on the property after the owner failed to pay $143 million in loans; the bank then purchased it back for $100.[12] Namdar Realty Group, a company like Moonbeam who invests in dying shopping malls, purchased the Mills in 2017 and has failed to invest money in the property.[13]
Recently, Frazer Township (where the Mills Mall is located) sued Namdar, seeking payment of roughly $11.5 million in delinquent special assessment taxes/fees owed on four parcels within the mall complex.[14] In late September, Namdar paid the fees at the last minute to avoid a sheriff sale of the property.[15] This leaves the future of the Mills uncertain, although it is likely that the property will remain in the hands of an absentee landlord who keeps rent low and fails to attract significant tenants.
Clearly, shopping malls are not isolated commercial ventures with the costs borne solely by developers. The consumers they attract bring tax money into the communities, and property values benefit from improvements to public infrastructure in the vicinity – the use of TIF and publicly issued bonds, and Namdar’s near failure to pay the special assessment taxes levied as a result of less than expected revenue, are evidence of this fact.
When malls fail, the communities in which they are located bear significant burdens as a result, including loss of tax revenue and failing infrastructure. Corporations are capable of declaring bankruptcy, but residents must wrestle with the blight on their communities and the landlords who have no interest in them as stakeholders.
Ultimately, the shopping mall question has drawn the attention of critics and innovators alike. For some, failed malls across the country represent capitalism’s inherent tendency to overproduce, leaving citizens and their communities without the tools to fight back against America’s private property system. Disinterested REITs like Namdar and Moonbeam have no stake in the issue, and are incapable of being swayed by fines or lawsuits.
Others, however, see a different future for America’s shopping malls.[16] If malls diversify the experiences they can offer through the addition of community services, smaller tenants, and unique options (e.g., museums), perhaps they can be of non-retail value to their communities. Only time will tell whether these ambitions to repurpose malls as effective community gathering spaces will ever be successful.
[1] https://www.post-gazette.com/business/development/2023/05/21/centuryiii-west-mifflin-mall-slag-heap-kaufmanns-sears-police-closed-crime/stories/202305210039
[2] Id.
[3] https://www.wtae.com/article/century-iii-mall-moonbeam-capital-stalled-developments/44568597
[4] https://www.wpxi.com/news/local/5-people-arrested-charged-after-allegedly-causing-extensive-damage-inside-century-iii-mall/Q56CSQOHGREBZKVVHGQ4REPYZA/
[5] https://www.cbsnews.com/pittsburgh/news/century-iii-mall-police-presence-west-mifflin/
[6] https://www.post-gazette.com/local/south/2023/07/18/century-iii-mall-demolition-west-mifflin-council-vote-condemn/stories/202307180141#:~:text=For%20years%2C%20the%20West%20Mifflin,at%20last%20month’s%20condemnation%20hearing.
[7] https://triblive.com/business/judge-fines-century-iii-mall-owners-more-than-240k-over-conditions-at-west-mifflin-site/
[8] https://financialpost.com/investing/igal-namdar-the-billionaire-bottom-feeder-who-buys-malls-as-others-run-away
[9] https://archive.triblive.com/news/pittsburgh-mills-muscles-its-way-into-landscape/
[10] https://www.post-gazette.com/local/north/2017/01/18/Pittsburgh-Mills-auctioned-off-without-change-in-ownership/stories/201701180167
[11] https://dced.pa.gov/programs/tax-increment-financing-tif-guarantee-program/
[12] https://archive.triblive.com/local/local-news/pittsburgh-mills-mall-in-frazer-sells-for-100/
[13] https://www.post-gazette.com/business/development/2023/09/09/namdar-pittsburgh-mills-mall-frazer-moonbeam/stories/202309100036
[14] https://www.alleghenyinstitute.org/the-continuing-pittsburgh-mills-tif-mess/
[15] https://www.wtae.com/article/pittsburgh-mills-mall-sheriff-sale/45307784
[16] https://www.forbes.com/sites/pamdanziger/2023/03/20/how-to-bring-zombie-malls-back-to-life/?sh=240e83646531
