Eastland’s possible financial struggle concerns city officials

By: April Lehmbeck | Advertiser Times | Published May 7, 2015

HARPER WOODS — City Manager Randolph Skotarczyk said he wasn’t panicking over recent news that Eastland Center missed a loan payment, but he was taking steps to find out more information from city financial planners and the mall management.

Other than news reports, he said he had not received any official notice about the reported financial issue.

He set up a meeting with the manager at the mall last week to talk. Prior to that, he reached out to the city’s financial advisers and planners to talk about a worst-case scenario, so that the city is prepared in the event that something did happen with the mall.

“It’s a large portion of our tax base — the single largest taxpayer,” Skotarczyk said.

According to Trepp LLC, a company that tracks financial data for commercial real estate, the mall missed one loan payment due in mid-April for a loan that was taken out in 2006.

The mall has experienced a decline in rental income from fewer occupants, according to data from Trepp, but the mall also is dealing with an increase in taxes, janitorial expenses and other fees.

As for missing one payment, Sean Barrie, of Trepp LLC, said that’s not uncommon among even healthy loans.

“The missed payment isn’t the main concern for the borrower and lender; it’s the reason for the missed payment (in this case, lower occupancy causing declining revenue),” Barrie said in an email.

A worst-case scenario would be that the mall eventually goes the way of Northland Center in Southfield, which was owned by the same company and closed its doors.

This isn’t the first time that Skotarczyk has reached out to mall management in recent years to chat about the shopping center.

“We’ve kept a dialogue with their general manager,” he said. “We talk a lot.”

While the news is concerning because of what happened with Northland, Skotarczyk said he isn’t in major alarm mode.

“It would create another hardship,” Skotarczyk said of the financial ramifications of something like a mall closure.

The good news for the city is that there is no talk of closing the mall, and city leaders believe that the site is a good location for commercial businesses.

“We believe that that location is not just viable, but a good location for other businesses in (the area),” Skotarczyk said.

“I’m going to keep thinking positively,” he said. “We’re not going to panic at this point.”

The mall currently is assessed at more than $13 million, but it was $24 million at one point.

Mayor Ken Poynter and Skotarczyk said that the mall has been making a profit despite the missed payment.

“The big problem is the fact that they have this big … balloon payment at the end,” Poynter said.

He also noted that with the fate of Northland, it’s a bit scary to hear about a missed payment for Eastland.

“It would be bad if we lost Eastland, but I’m sure that there would be somebody there to pick up the ball and maybe develop it in a different way,” Poynter said, adding that there’s no news of any potential closure.

He thinks there’s potential for the mall to recover.

Eastland has a number of national chains in the mall and successful anchor stores such as Macy’s and Target, Poynter said.

The mall did lose an anchor store when Sears announced plans in 2012 to close its Eastland location.

The occupancy rate is down, but there are thriving businesses around the main mall, including Lowe’s, Home Depot and restaurants like Chili’s, Poynter said.

Poynter pointed out some challenges that the mall faces today, as opposed to when it first opened.

“At the time when Eastland began, which was 1957, there weren’t that many different malls and many different choices around,” he said. “It’s not really meeting the needs of the surrounding communities, and that’s a problem.”

Another challenge that the mall needs to overcome is perception.

“There is a perception — and I underline ‘perception’ — of bad things happening there … and that’s not the case,” he said.

Eastland has more than a financial role for the city; there is a lot of history in the shopping center.

“I always understood, too, that Eastland was to be the first major mall in the United States, and what held that up, from what I understand, was a steel shortage from the Korean War,” Poynter said.

“I was at Eastland on opening day in 1957,” Poynter said.

That grand opening was a big affair in the city. It cost more than $25 million to build the center, which would service the 497,000 people who planners thought would live within a 15-minute drive of the center in 1960, according to mall information.

When Eastland opened, some of the stores were J.L. Hudson Co., S.S. Kresge Co., G.R. Kinney Shoes, Kay Corsetiere and Morley Candy, according to mall information.

Poynter remembers the important role the mall played in the community over the years.

“They … had circus acts,” he said. “They even had an Easter Day parade where folks would come dressed in their finery.”

He thinks the mall might want to work on ways to attract people, but he also believes that work needs to be done on the mall itself, such as repairs to the parking lot and the inside of the mall.

“Eastland can really recover,” Poynter said of the future of the shopping center.

Representatives of the mall could not be reached by press time.