Things are getting worse at McKinley Mall.
The mall fell delinquent on a $25.8 million loan payment over the summer. Now, it has been put into receivership by a U.S. Bankruptcy Court judge and had its value cut by 75 percent.
Next, its tax-assessed value could be slashed, which would leave government and school officials in Hamburg scrambling for budget cuts and tax increases.
Worth an estimated $56.6 million in 2013, the mall’s value has been dropped to $15 million, according to the mall’s major loan servicer, Wells Fargo. That means the mall is worth less than half of the $35.1 million loan for which the mall is being used as collateral. That loan comes due in 2023.
Like many other mid-range enclosed shopping centers across the country, McKinley Mall has become less valuable after losing major anchor tenants, attracting fewer shoppers and generating less revenue.
Built in 1986 and renovated in 2008, McKinley Mall’s decline has been swift.
It lost a Macy’s anchor store and a Macy’s Home store in 2016, which were bought by Benderson Development but remain empty. Ulta, which occupied high-profile space facing McKinley Parkway, left the mall last year in favor of Quaker Crossing in Orchard Park.
Bon-Ton took up 13.4 percent of the space accounted for in the loan, but it’s been vacant since the department store chain went out of business in August. A string of smaller stores have also gone dark.
Sears is the mall’s largest remaining tenant, occupying 20 percent of the shopping center.
That the bankrupt department store takes up so much space is a troubling prospect. The company has closed all but its McKinley store in the Western New York market, and it could go out of business if a bid by Sears’ chairman’s investment company fails at a bankruptcy auction on Monday. The other bidders are liquidation companies that would sell off the company’s remaining inventory and properties and shutter the chain.
McKinley’s other major tenants include the struggling J.C. Penney department store chain, taking up almost 15 percent of the mall’s space, Best Buy with 4.6 percent and Barnes & Noble with 4 percent, according to real estate advisory firm Trepp.
The Woodmont Co., McKinley's receiver, said it is "taking all action necessary to preserve and protect the asset.
"Among the operating priorities is increasing the occupancy of the property, which is critical in light of the closing of The Bon-Ton and ULTA prior to the commencement of the receivership," said Fred Meno, Woodmont president and CEO.
Stoltz wants its tax assessment to reflect the mall's lower value, but is asking for a drastic devaluation. It has filed a petition with the State Supreme Court to lower its assessment, currently $24.3 million, to just $2.8 million.
That worries Town of Hamburg Supervisor James Shaw, who said the mall’s lowered tax bill would leave Hamburg taxpayers shouldering an unfair share, and put its schools and villages in the lurch.
The mall is Hamburg’s largest source of tax revenue. The town, Frontier School District and Erie County all are fighting against the assessment reduction.
If the assessment is cut, Shaw said the town could sell some of its real estate, including a former railroad terminal and library building. It is also considering ending its lease of Woodlawn Beach, it said.
Woodmont Co. has taken over the assessment appeal since taking receivership. Stoltz could not be reached to comment.