Gang activity, crime and a store that sells toilet paper are some of the reasons why anchor retailer Dillard’s wants out of Highland Mall before its lease is up.
Dillard’s announced last month that it would leave Highland Mall “in the next few months,” and in a recent lawsuit filed in U.S. District Court, Dillard Texas LLC and The Higbee Company — both wholly owned subsidiaries of national department store chain Dillard’s Inc. — asked the court to void its contractual obligations to Highland, including paying rent on the remainder of its lease.
Dillard’s alleges that the owner — Highland Mall Limited Partnership, made up of Simon Property Group Inc. and General Growth Properties Inc., two of the country’s largest mall operators — let it deteriorate to such a degree that it has forced Dillard’s to close. “As a result of the continued deterioration of Highland Mall from a once-first-class shopping mall to the ‘ghost town’ it is becoming, [Dillard’s] plans to cease operations in both its stores. … There is no alternative for [Dillard’s],” the lawsuit says.
Dillard’s plans to close both its two-level stores within the mall, one focused on men’s clothing and the other on women’s fashion and home decor. Dillard’s lease for the men’s store expires in 2017, while it owns its women’s store but pays Highland Mall for common area maintenance and other charges.
Representatives from Indianapolis-based Simon Property Group and Chicago-based General Growth Properties, which have jointly owned Highland Mall since 2004, could not be reached for comment.
Built in the late 1960s and early 1970s, Highland was the first of Austin’s major indoor malls and for years “was most certainly the premier shopping mall in the greater Austin area,” the lawsuit says.
Dillard’s was among the mall’s first tenants when it inked its lease and operating agreements with Highland in the 1970s. But “in recent years, the mall has deterioriated,” the lawsuit says, citing declines in customer traffic, anecdotal reports of gang activity and crime that have led to a “snowball effect” of store closings.
Another anchor tenant, J.C. Penney, closed its Highland store in 2006, and that space has remained vacant. While about 100 tenants operate in Highland, according to a Securities and Exchange Commission filing by Simon, occupancy has been the lowest of any local indoor mall for years and reached a low of 60.5 percent at the end of 2008, while its counterparts were more than 94 percent full.
The lawsuit says Highland didn’t adequately address repeated communications by Dillard’s seeking to remedy Highland’s mounting problems. Last year, Dillard’s vice president of real estate, James Cherry, wrote to Highland’s owner “expressing grave concern that the mall was not being operated consistent with either the standards outlined in the lease or pursuant to developer’s operating covenant.” Cherry wrote Highland again seven weeks later, the lawsuit says.
Highland’s response was that it “disagreed” with Dillard’s assessment, the lawsuit says. The lawsuit criticizes the mall owner for doing little “to solve its burgeoning problem of poor tenant mix, store closings and vacancies.” And when it did find tenants, it made things worse “in that the new tenants — a store that sells toilet paper, a discount perfume store, and a discount children’s clothing store — are not the caliber of a first-class, enclosed shopping mall.”
Analysts have said that without significant reinvestment, Highland’s future is bleak. Meanwhile, speculation continues that debt-laden General Growth Properties, which has been on a selling spree of its more than 200 U.S. malls, will divest its half of the mall.
What was the comment Simon's CEO David Simon made recently about how the company was hoarding cash? Aren't the Simons' two mantras for conducting business is that cash is king and always use other people's money? And didn't we learn that despite a recent public offering to raise money for the debt-ridden company that Simon family members and other corporate insiders weren't buying stock in their own company. Yet, Mayor Greg Ballard is going to hand over another $15 million a year to the Simons' Pacers franchise without blinking an eye because the Simons say their NBA franchise is losing lots of money. Is he asking whether Simon Property Group is meeting the job creation it promised the City when it destroyed the only green space around our State House to build its new corporate tower for SPG with more than $20 million in taxpayer handouts and a free parking garage for their employees? What else does Mayor Ballard want to do for the Simons? He thinks it would be just fine if all of the sales tax revenues from Circle Centre Mall are diverted to the CIB. You know, that's the mall the City built with your money for $320 million and turned over to the Simons to operate rent free. See how it works when the man who is really running city hall is the high-paid lawyer for the Simons and not the man you thought had been elected to represent your interests.