McKinley Mall auction could give Benderson a second chance to buy it

Now it's going to get a second chance – if it wants.

The mall's owner – whose bid beat out Benderson in 2021 – is putting the mall up for sale through an online auction, with a $3 million minimum bid that is less than a third of the price that Benderson previously was willing to pay.

Whether Benderson is interested is unclear. Company officials couldn't be reached to comment on Thursday.

But town officials are hoping it attracts the interest of either the Buffalo-based developer or other well-heeled bidders who could revive what was once the most popular retail site in the Southtowns or transform it into a new destination.

"I hope it gets lots of attention, because it's a nice piece of property and it's in a great location," said Hamburg Town Supervisor Randy Hoak, who was surprised to learn of the auction, not from the owner, but from a town resident who spotted the online listing. "We want to make sure we attract an owner that is really willing to maximize the potential for that parcel."

The mall has struggled in recent years, losing tenants – and its place at the top of the Southtowns retail hierarchy – to the Quaker Crossing complex two miles away in Orchard Park. About 44% of McKinley's space is vacant, according to a listing for the auction.

The Kohan Retail Investment Group – a Long Island firm owned and led by Mike Kohan – is putting the mall up for sale through an online auction that is scheduled to end on April 19. Kohan acquired the mall, located on nearly 75 acres at 3701 McKinley Parkway, in the summer of 2021 for $8.5 million after its previous owner defaulted on a loan. 

The auction listing describes the 728,397-square-foot mall as a “rare opportunity to acquire a super-regional mall with substantial value-add opportunity."

Bidding will run from noon on April 17 to noon on April 19, with a starting minimum bid of $3 million. That's just a little over one-third of what Kohan paid less than two years ago, although minimum bids are typically set artificially low to attract bidders to potentially drive the price up.

"I think there will be a larger regional and national appeal," Hoak said, citing the proximity to the new Buffalo Bills stadium that will be constructed in Orchard Park.

The auction listing cites the mall's proximity to downtown Buffalo and the Canadian border, less than 10 miles away, along with a "strong tenant roster" anchored by J.C. Penney, Best Buy, Bed Bath & Beyond, Barnes & Noble and Old Navy. And it lists net operating income of $732,245.

Part of Kohan's vision for the mall called for seeking nontraditional tenants, in a bid to get spaces filled, vacancies down and traffic up. The mall has about 50 tenants, as well as nontraditional mall uses such as a cat rescue site, a mixed martial arts studio and a music school.

More recently, a car wash. Splash Car Wash has proposed demolishing the TGI Friday's restaurant at the mall's entrance and building a 5,200-square-foot facility. An indoor skate park called Food Court Skatepark, said last month that it would open in the mall in April.

But the mall has continued to lose traditional retail tenants, including Claire’s boutique, once a mall staple, which moved to Quaker Crossing.

Sean Doyle, executive director of the Hamburg Industrial Development Agency, said he hopes a new owner will diversify the property by adding housing and offices, following a model similar to what Uniland Development Co. is proposing at Eastern Hills Mall in Clarence or what Douglas Jemal's Douglas Development Corp. is planning for the Boulevard Mall in Amherst.

"I would hope it would become largely retail but then have a mixed-use residential component, like a town center concept." The back of the nearly 75-acre parcel "could lend itself to some industrial distribution," while the front would be good for for retail hospitality operations, like hotels and restaurants.

The town in 2021 passed an incentive zoning law for the mall and its ring properties, allowing incoming tenants to have flexibility in usage in exchange for guarantees to the town, such as aesthetic improvements, creation of jobs or money to go toward town initiatives.

"There's a lot of great neighborhoods and communities surrounding the mall that could support several different types of businesses," Hoak said. "The town would be happy to entertain creative ideas from developers that are looking to acquire that parcel."

Benderson has a natural interest and possibly an inside track to a deal, as well as prior support from the town. The developer already owns the former Macy's and its now-closed home store inside the mall, a 6-acre ring of property near the Dipson movie theater and the Hobby Lobby on one of the mall's outparcels.

As a result, it has the right – through prior encumbrances and deed restrictions – to reject certain types of projects on the mall property. Benderson already refused to allow Kohan to lease space in the former Sears store for a self-storage facility, and it denied efforts to bring a used car dealership to another of the mall’s outer parcels once occupied by a Pier 1 store.

When Kohan initially agreed to buy the mall, Benderson claimed that it had tried to make a higher purchase offer but was ignored by the real estate broker, Newmark – the same broker now representing Kohan in the auction. In an affidavit at the time, it asserted that Newmark didn't give it a chance to make an offer, but that it would have paid $10 million – $1.5 million more than Kohan, and close to the assessed value of $10.5 million.

With Benderson's support, the town sought to block the deal by contesting it in court and questioning Kohan's financial wherewithal and redevelopment capabilities. But State Supreme Court Justice Emilio Colaiacovo overruled their objections, allowing the sale to proceed.

Still, Kohan has a history of unpaid bills at its properties, resulting in utility shutoffs, and McKinley's main phone line has been shut off at least once since Kohan took over. Kohan also owes $176,069 in town, county and special district taxes that were due Feb. 15.

“This was a concern from the beginning when Kohan Retail Investment Group acquired the property," Hoak said. "The Town of Hamburg is currently exploring our options, and we hope any sale of the property would contemplate the delinquent taxes so that taxpayers aren’t left on the hook."