Everyone thought Bon-Ton would be the next shoe to drop for McKinley Mall.
When the now-bankrupt department store announced in November that it would shutter 40 of its stores, experts worried one of them would be at McKinley, possibly spelling the beginning of the end for the Hamburg shopping center.
The mall still is in trouble – it’s in danger of defaulting on the biggest piece of its mortgage – but Bon-Ton wasn’t the next shoe to drop, after all. It was Ulta Beauty.
The mall had long pointed to its shiny new cosmetics store as a sign that McKinley was thriving and evolving with the times. The mall had undergone a major (and inspired) renovation, lining some mall stores up in a strip-plaza format facing McKinley Parkway. It was a good idea, aimed at luring shoppers who prefer to get in and out of stores quickly rather than wind their way through mall corridors.
But Ulta left last month in favor of an actual shopping plaza; Quaker Crossing in Orchard Park. And though it leaves less than 10,000 square feet empty at McKinley, its loss will be felt in such a prominent space.
The mall already lost retail tenants that were struggling, including Wet Seal, which closed all of its stores, and the Gap. Jeweler Spears & Co. recently moved to Fashion Outlets of Niagara Falls, and the mall will lose Claire’s, which filed for bankruptcy last month.
There were (and still are) grave concerns about McKinley’s other anchors, too. Bon-Ton has filed for bankruptcy and is closing stores, though so far the McKinley store has been spared. After losing two Macy’s stores in 2016, losing the Bon-Ton would’ve put the mall’s occupancy rate at 78.7 percent – below the 80 percent occupancy benchmark where analysts consider a mall at risk.
Two of the mall’s other anchors are on thin ice. Sears is on death watch. Both it and J.C. Penney have been shedding hundreds of stores. Together, they take up more than a third of the mall’s space.
Losing a second anchor could also let other retailers in the mall activate “co-tenancy clauses,” which would allow them to cut their rent payments or terminate their leases without penalty, possibly setting off a freefall in foot traffic and cash flow, according to analysts at Morningstar Credit Ratings.
The two Macy’s stores, now owned by Benderson Development, still sit empty with no immediate plans for development.
Now last week, a special bulletin declared the mall’s owner at risk of “imminent monetary default” on the biggest piece of a $35.5 million commercial mortgage on the mall, according to debt research firm Fitch Ratings.
Fitch and commercial real estate advisory Trepp warned that the loan had been transferred to a “special servicer” that handles troubled loans and is brought in to prevent losses. While a transfer like that can be the first step toward a court-ordered seizure of property, the goal is to work out a deal to repay the loan and keep the mall under Stoltz Management’s ownership.
Though the mall’s revenue has fallen and it has some maintenance concerns, McKinley still has plenty going for it. Payments are current, and the loan doesn’t mature until 2023. Its occupancy rate was 92 percent in November, Morningstar said. It’s also a clean, well-liked mall, which draws from a large radius of Southtowners who would rather shop there than the larger and more distant Walden Galleria.
McKinley has a long way to go before Western New Yorkers count it out.