Merle Hay Mall will use $2.5 million loan to redevelop Sears, Younkers spaces
Merle Hay Mall has positioned itself in the retail market with discount and value-priced stores like Kohl's, Target, Shoe Carnival and Old Navy. The newest addition is Ross Dress for Less, which opens Friday.
Merle Hay Mall's owner says a $2.5 million loan from Polk County will allow her company to purchase and redevelop two spaces left vacant by the closure of Sears and Younkers stores.
The loan will keep the Des Moines shopping center viable and benefit other mall tenants when the department store spaces are redeveloped, said Elizabeth Holland, the mall’s CEO.
But Iowa State University economist Dave Swenson said the loan could set a bad precedent for other faltering retailers.
“Economic development (funds) aren’t generally invested in retail, but in those businesses that bring in jobs or offer re-employment opportunities,” he said.
The Polk County Board of Supervisors approved the loan Tuesday morning. It will be repaid over 15 years with a 1 percent interest rate.
The money will come from an economic development account funded with gambling revenue from Prairie Meadows Racetrack and Casino.
“We have never done anything like this before,” Supervisor Angela Connolly said after the meeting. “This was unique.”
If Merle Hay Mall were to fail, “it would be devastating to the neighborhood and the region,” she said.
Merle Hay's owner wants to purchase the 161,000-square-foot Sears store, which closed Oct. 14, and the 165,000-square-foot Younkers, which was shuttered Aug. 31. Both companies have filed for bankruptcy.
Holland said she'd like to tear down the Sears building and replace it with a strip mall that would open in early 2020.
The two-story Younkers space would be converted into two stores: “a larger format general merchandise store” on the upper level and a family entertainment venue on the lower level, Holland said. She would like to see those spaces filled early next year.
For malls to survive in this challenging retail environment they either have to be a destination or convenient for customers, Holland said. “If you’re not either, then people will shop online,” she said.
Merle Hay Mall is trying to position itself as both, she said.
Flix Brewhouse and several of the mall's retailers, such as Target, Kohl’s, Old Navy, Ulta and others, make the mall a destination. The mall’s location also makes it a convenient stop for shoppers on their way to and from work, she said.
Swenson said retail stores are struggling because of people’s choices on where they want to shop.
“Malls are struggling in general. They have bigger issues than these two stores closing,” he said, adding that the private sector supports retail development.
“This is not a good argument for public investment,” he said.
The Merle Hay loan could lead to other retailers seeking public support, he said. “Why not give other groups assistance?” he said.
Southridge Mall in Des Moines and Valley West Mall in West Des Moines both have empty Younkers stores.
Holland said the mall will not purchase the Younkers and Sears spaces until leases with future stores are completed. And bankruptcy judges for both companies will have to sign off on the deals, she said.
The mall is working with Des Moines and Urbandale on other public incentives, including expanding the existing tax increment finance district to help with other improvement at and near the mall. The mall property sits on the border of the two cities.
Holland also wants to sell out-lots on the mall's property, where Starbucks, Applebee’s and IHOP are located.
Money from those sales would be reinvested in the mall, she said.