When the news came one week before Christmas that the Shops of Grand Avenue had been sold, there was almost a palpable sigh of relief that the new owners were local.
This marked the first time in a decade that some of the people that own the mall would actually reside in the same city as the mall.
Once considered the jewel of downtown, the troubled Grand Avenue has fallen prey to the same fate as many urban malls across the country. Now plagued with low occupancy and low-end tenants, the 293,596-square-foot enclosed mall at 275 W. Wisconsin Ave., is virtually empty on nights and weekends.
Tony Janowiec, principal at Milwaukee-based Interstate Parking, wanted to buy the mall two years ago, but was beat out in an online auction by Brooklyn-based real estate investor Alex Levin, who bought it for $16.5 million.
A year later, Janowiec put together a buyer team that includes local developer Chuck Biller and purchased the Grand Avenue from Levin for $24.5 million. The only out-of-state member of the new ownership group is Minneapolis-based Hempel Cos., which is run by Janowiec’s college buddy, Joshua Krsnak.
So far, we don’t know a lot of concrete details about the new ownership group’s plans for the Grand Avenue, other than a Ross Dress for Less is in negotiations to lease 25,000 square feet.
Janowiec is also planning to move his own offices to the mall and will occupy about 6,000 square feet.
Krsnak has significant commercial real estate experience. His firm sold a 26-story, 394,000-square-foot office tower in downtown Minneapolis in November that was 48 percent occupied when he purchased it four years ago, and 99 percent full when it sold.
Janowiec’s company ran the parking for that building and his Minneapolis office was located there.
While excitement is still running high for the new owners of the Grand Avenue in Milwaukee, some local real estate professionals who have watched the mall exchange hands over the years fear the latest buyers are facing an uphill battle.
Shopping patterns in general have changed. Green Street Advisors, a real estate and REIT analytics firm, predicts that within the next 10 years, 15 percent of malls will fail or be converted into non-retail space.
There is also history to contend with. When Levine purchased the mall in 2014, he declared the strategy for the mall would be mixed-use. But he made few changes.
The new owners are thinking along the same lines. They’ve said they would like to partner with an educational institution or a corporation that could occupy space in a mixed-use redevelopment of the Shops of Grand Avenue.
“You’ve got to change the genetic make-up of the mall and bring in more complementary uses, versus trying to put in six Subways,” Krsnak said. “We’ve got to stop trying to keep it exactly the same way it’s always been, because then, we just get what we’ve always got.”
But will a major redevelopment of Grand Avenue actually work?
“They stand as good a chance as anyone since Northwestern Mutual bought that place 30 years ago,” said Milwaukee Alderman Robert Bauman, who represents the downtown area.
“To be successful, you need access to parking, people and good retail choices,” Bauman said. “They’ve got the parking, the people part is improving, now they need the choices – that’s the hard part, there is not a whole lot of choices in that mall right now.”
The “people part” has been improving. When the Mandel Group started building housing in the Westown neighborhood a decade ago, there were only 215 households there. Today, there are 435 new residential units planned or recently built in the area. The Posner Building at West Wisconsin and North Plankinton avenues was converted into 105 apartments, The Buckler at 401 W. Michigan St. has 207 units, Bear Development LLC is converting two office buildings into a 49-unit loft apartment complex at 700 W. Michigan St., and The Germania Building, 135 W. Wells St., will be converted into 74 apartments.
Peter Glaser, vice president of CBRE, said today versus two years ago, the mall stands a much better chance of succeeding – largely because of the residential that has been, or will be, added to the Westown neighborhood.
Typically, for a regional shopping center to succeed, it needs 100,000 people living in the immediate area. However, a downtown mall is different because of the daytime traffic, Glaser said.
“When we look forward a year from now, I think we’ll see the mall has made some progress,” Glaser said. “There has been a huge development wave going on downtown, and that is going to be good for Grand Avenue.”
Lyle Landowski, partner at Colliers International|Wisconsin, thinks having a local owner in place with emotional ties to Milwaukee will be beneficial to the mall, but believes the Grand Avenue’s best shot at survival would be using it for something other than retail.
Russ Sagmoen, who heads the retail group at Colliers, agrees.
“I think a great use would be a corporate headquarters or something that is service-based, instead of soft goods,” Sagmoen said. “It’s going to very challenging to land a large retail anchor – although everyone is hoping for a success.”
Tom Treder, a partner with Commercial Property Associates Inc., says the stigma of recent closures by retailers at the mall and the physical limitations of the property itself – including access points and the outdated building layout – will present challenges for the new owners.
“The mall needs a catalytic anchor to kick off a redevelopment at the property, which I am not sure will happen in the short term,” Treder said. “I am very hopeful that the new local ownership group will come in with fresh ideas and take a long-term approach to solve what has become one of the most challenging projects in southeast Wisconsin.”
The new owners have said they plan on exploring partnerships with local colleges and universities. They pointed to Rochester, Minn., which revamped the Galleria Mall about five years ago and turned it into The Shops at University Square. That mall is now located underneath the University of Minnesota Rochester and is connected by skywalks to local hotels.
Having a steady stream of income from the Grand Avenue parking structure is going to prevent hasty decisions about the mall’s redevelopment, Krsnak said.
Whatever is decided, Krsnak said we’ll see a lot of progress in 2016, although he cautioned real estate moves slow, so even if the tenants were lined up today, it would take many months for their presence at the mall to come to fruition.
“Over the last 10 years there has been an out-of-state owner and when you are off-site, it’s out of mind,” Krsnak said. “We’ll be at the mall every single day, and we’ll be paying attention.”
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