Last updated on July 3rd, 2019 at 04:31 pm
In 2004, construction began on a $300 million project that would transform an outdated Milwaukee-area shopping mall into what was then considered to be one of the most modern and innovative retail destinations in Wisconsin.
When it reached completion, the bigger and better Bayshore Town Center in Glendale was seen as a North Shore jewel, and a trendsetter for the other area shopping centers.
But after 12 years of ownership changes, a global financial crisis and major shifts in the retail industry, the mall seems to have lost its sparkle. Two of its major anchors have disappeared and other brick-and-mortar stores and restaurants have followed, leaving Bayshore with more than 50 available tenant spaces.
In 2017, New York-based AIG Global Real Estate Services, acquired the mall in a deed-in-lieu-of-foreclosure transfer, and has since promised to breathe new life into the troubled mall with a $75 million redevelopment plan that is set to take off soon.
Now, in the midst of a disrupted retail industry driven by the rise of e-commerce and the decline of brick and mortar, Bayshore stands at a crossroads as it tries to adapt.
Glendale’s Bayshore Town Center, which first opened in 1954 as Bay Shore Shopping Center, was the first regional shopping center in the state to shift away from its standard format, transitioning from an enclosed 500,000-square-foot retail structure to an outdoor pseudo-city with 1.2 million square feet of mixed-use offerings.
The massive redevelopment, led by Columbus, Ohio-based developer Steiner & Associates, was aimed at giving Bayshore a pedestrian-friendly, downtown feel. At its 2006 opening, it added to the site 11 new buildings, a grid of city streets and a central public square for hosting year-round community events. It also added an indoor central rotunda with space for entertainment.
Existing anchor stores Sears, Boston Store and Kohl’s remained, but were now complemented by high-end brick-and-mortar tenants including J.Crew, Brooks Brothers and Vera Bradley, as well as restaurants such as California Pizza Kitchen, The Cheesecake Factory and Devon Seafood + Steak.
The area’s first Trader Joe’s location, an Apple store, an iPic Entertainment movie theater and bowling alley, and an LA Fitness also joined the lineup, helping Bayshore compete with other area malls, like Mayfair in Wauwatosa, which had dominated the local retail scene.
And with the addition of office space and residential units, Bayshore could attract more shoppers and boost sales, which averaged $300 per square foot (compared to Mayfair’s $500) before the redevelopment, according to a 2009 case study by ULI Development.
A challenging environment
As part Steiner’s original plans for Bayshore, additional residential and retail developments were to be constructed on the northern portion of the property and along North Lydell Avenue, its eastern border with Whitefish Bay. Some of that development would have replaced the now-demolished Sears building, which would have been vacated and razed at the end of the store’s leasing period.
But in late 2007, the Great Recession hit, so the second phase of Bayshore’s redevelopment never made it past the planning stage.
Unable to fully complete the project, Steiner sold its portion in 2010 to New York-based Olshan Properties LLC, a junior partner in the development. New York-based Corrigan Holdings also owned a portion of the mall, but Olshan later bought out that company to take full ownership of Bayshore.
After that, things started to go downhill, said Glendale Mayor Bryan Kennedy.
“Olshan never invested in the mall at all,” Kennedy said. “As a matter of fact, they severed all ties to local community groups, they did a real disservice to the city in that they tried to stretch every dollar bill until George Washington tried to scream for mercy. They didn’t invest, they didn’t do upkeep, they raised the rate for tenants and they basically severed their ties with the school district and the JCC and all these groups that used to hold events here.”
Not only did Olshan mismanage the mall, it also stopped making mortgage payments, which later led to the property’s near-foreclosure, Kennedy said. The mall’s mortgage lender at the time was AIG, which later acquired the property.
As it was, the mall was already up against challenges that simply came with the territory.
The 52-acre site has long been considered prime real estate because of its location along I-43 in one of Milwaukee’s most affluent areas, but the area’s retail market is limited by its close proximity to Lake Michigan to the east and by lower income neighborhoods to the west, where many residents lack disposable income.
Bayshore’s decline was brought on by more than just internal or geographical issues, though.
“Further, the issues are amplified by some of the tenants that were (at Bayshore) originally and have since gone in there, just because of, not only the recession, of course, which cleared out a lot of that, but just the changes in retail as a whole right now that are going on – the evolution of e-commerce and Amazon and digitally native brands,” said Cory Sovine, senior vice president of retail at Colliers International in Milwaukee.
As the ease of online shopping and the rise of Amazon took the place of brick-and-mortar shopping, numerous anchor stores and large retailers were forced to close locations or to shut down completely. And as a result, regional malls everywhere were taking a hit.
For Bayshore, that meant losing Sears in 2014, Sports Authority in 2016 and most recently, Boston Store, which closed in 2018 as a result of Milwaukee-based The Bon-Ton Stores Inc.’s liquidation.
Smaller, more specialized retailers have also been affected. Over the past few years, Bayshore has lost Vera Bradley, J.Crew, Teavana, American Eagle, Shaw’s Jewelers, Charlotte Russe, Payless ShoeSource and Gymboree, among others.
“As you see a lot of these generational retailers such as the Sears and the Bon Tons and the Gaps, Abercrombie & Fitch and all these other retailers that had been there, it’s not necessarily reflective of the mall, but they’re just kind of obsolete retailers right now,” Sovine said. “Many of them are bankrupt or in the process of going bankrupt.”
In addition, restaurants Hom Wood Fired Grill and Sprecher’s Restaurant & Pub have shuttered within the past year, and iPic Entertainment closed its movie theater and bowling alley in 2018.
Dallas-based Cypress Equities Managed Services L.P., which was hired by AIG to manage and lease the property and to take the lead on Bayshore’s redevelopment plans, says the town center’s store closures – and the upwards of 50 available spaces throughout the mall – are not a cause of concern.
“Because we are nationally-based, we are aware of what’s going on on a national basis with all tenants, so any closure that has happened has not been a surprise,” said Kirk Williams, managing director of Cypress Equities. “We look at it as an opportunity to right-size the retail offering and bring in the right mix that resonates with the community.”
For Bayshore, “right-sizing” retail would mean downsizing that space by almost half – from 828,000 square feet to 522,000 square feet – and demolishing or converting existing buildings for other uses. That’s according to redevelopment plans that were submitted by Cypress to the City of Glendale in November.
Williams said those preliminary plans have since “changed significantly,” but Cypress could not yet provide a full update.
The project’s centerpiece would be the demolition of Bayshore’s original mall portion on the property’s north side and the 167,100-square-foot former Boston Store building on the property’s east side.
Those structures, which Williams referred to as “disconnected retail,” would then be replaced by a “horizontal mixed-use development” for non-retail uses, including residential units, a hotel, independent senior living, a medical facility, restaurants and office space.
According to the original plan, the indoor portion of the mall’s second floor retail space would be converted into additional offices or co-working space, increasing office space from 213,000 square feet to about 248,000 square feet.
Those new and converted developments will be connected to the mall’s existing portions by way of its rotunda and attached east side parking structure, which was built in 2006. An “activated interior area” would be created around the rotunda, which would connect to the parking structure with an entrance on the second level, Williams said.
Another focal point is the mall’s centralized public square, an open green area that sports a fountain in the summer and a Christmas tree during the holidays. Currently, the square sits about three feet below street level and is surrounded by large planters, disconnecting it from surrounding restaurants and passers-by. Cypress plans to raise and open the space to better connect it with the rest of the mall, Williams said.
Upgrades to the mall’s general appearance are also on tap, including landscape and cityscape features and building facades, which would undergo cosmetic changes, Williams said.
Construction is set to begin this summer. Asked when further details about the project would be released, Williams said he could not say, but “probably not that far off.”
A new purpose
The underlying vision for the project, Williams said, is to position Bayshore as a community gathering place, which is part of the experience people can’t get from shopping online or communicating with their smartphones.
Tenants that will continue operating at Bayshore after the redevelopment – Cypress’ plan lists a lineup of 40 businesses, including Athleta, Brooks Brothers, Trader Joe’s, Forever 21 and The Cheesecake Factory – along with new stores that will join the roster, such as Total Wine & More, will reflect the evolving tastes and preferences of consumers, Sovine said.
“On the surface, it seems like there’s a lot of vacancy (at Bayshore), but in reality it probably works to their advantage – it gives them an opportunity to turn over some of those generational retailers that maybe aren’t as relevant right now and get in some new and exciting experiential retailers that are going to resonate more with the customer,” he said.
In today’s retail world, a 7,000-square-foot tenant space that houses retailers like Apple will drive 10 times the foot traffic that a 70,000-square-foot department store would, so mall owners are typically not afraid to let those stores go, Sovine said.
“They can repurpose that space into a much more efficient and better drawing space, which will ultimately create more revenue for the landlord,” he said.
Other area malls have recently turned to food and beverage, entertainment, and specialty or discount retail as fillers for empty spaces.
The former Sears building at Southridge Mall in Greendale was redeveloped and is now occupied by Dick’s Sporting Goods, Golf Galaxy and Round1 Bowling & Amusement.
Brookfield Square demolished its former Sears building and is currently constructing a building that will house Chicago-based restaurant and entertainment center WhirlyBall and a Movie Tavern by Marcus cinema.
No such plans have been in the works for Bayshore, which Sovine suspects is likely a reflection of the mall’s previous ownership and its lack of capital to make an investment of that size.
And as the current ownership works to redevelop the mall, it will be more cost effective for them to have large blocks of vacant space to work with, he said.
Preliminary plan for new Bayshore Town Center
Proposed uses for “out parcels”
Parcel 1: 0.86 acres – retail use
Parcel 2: 3.05 acres – senior housing use
Parcel 3: 0.86 acres – medical office building use
Parcel 4: 1.29 acres – market rent multi-family
Parcel 5: 1.54 acres – market rent multi-family
Parcel 6: 0.84 acres – hospitality
Parcel 7: 0.81 acres – office
Help from the city
In 2002, Glendale created a tax increment financing district to help pay for Bayshore’s original $300 million redevelopment project, including demolition, environmental cleanup and new infrastructure costs.
Bayshore makes up a huge portion of Glendale’s tax base. That, combined with its TIF investment, shows the city has a lot at stake in the shopping center’s success.
“In a city with a gross equalized value of a little over $2 billion, Bayshore is $300 million of it,” Kennedy said. “It is the largest single property tax payer in the city.
Of the annual property taxes paid by Bayshore, $7 million of it goes toward paying off the TIF bonds from the original project. Those bonds could be paid off by 2026, and once that happens, “(local government would) see a huge influx of (tax) revenue,” Kennedy said.
But as part of the new redevelopment proposal, the city would provide some funding, restructuring the TIF and extending it to 2033.
In exchange, AIG plans to pay off the city’s remaining $56.6 million in outstanding tax financing debt and invest a total of $75 million in the new Bayshore redevelopment project, according to city documents.
“They see that there is a lot of great opportunity here and they want to tap into where the market is headed over the next 10 to 20 years so that the kind of development that they do is the kind of development that is sustainable and profitable year after year,” Kennedy said.
He said Bayshore’s previous owners had never defaulted on their annual bond payments, but considering its struggles over the past decade, the city started to question the mall’s ability to pay off the bonds in time. So when AIG rolled out plans to invest in the property and pay off the debt from the original project, the city loved the idea, Kennedy said.
The next step for the city is reassessing Bayshore at its fair market value, Kennedy said. Currently, the mall is assessed at $310 million. In the early 2000s, before it was redeveloped, it was valued at $70 million.
The mall’s reassessment will be part of a citywide assessment of all 7,000 Glendale properties, which is set to take place over the next few months, Kennedy said.
Although the original timeline has changed, Kennedy expects Bayshore will one day fulfill its original purpose of generating more revenue for Glendale. That could help lower property taxes and fund capital infrastructure and improvements.
Only time will tell if another redevelopment project will turn Bayshore around, but Kevin Schmoldt, a senior vice president at MLG Commercial, said the thriving retail landscape in its immediate vicinity could be a good sign.
Various retail strips along North Port Washington Road have been successful in recent years. Those include a development anchored by Pick ’n Save at the intersection of North Port Washington and West Green Tree roads and one just south on North Port Washington Road at West Bender Road. Both retail centers are fully occupied, Schmoldt said.
Chick-fil-A earlier this year proposed plans to construct a standalone restaurant on a commercial lot just south of Bayshore on North Port Washington Road.
However, Bayshore’s retail woes, most of which are no fault of its own, seem to have given the area a negative reputation. Schmoldt said he recently spoke to a tenant who had no interest in looking at sites near Bayshore because he didn’t want to be under the mall’s shadow.
Schmoldt said he wants to change the narrative surrounding Bayshore, citing the other successful developments nearby.
But he also thinks Bayshore “needs to find a new audience as it adapts to a changing retail environment.”
“It has the potential to become vibrant again,” he said.