Waco’s Richland Mall, the largest enclosed retail center between Dallas and Austin, is up for sale.
The approach of the California-based real estate company marketing the mall includes distribution of a 56-page document with annual sales, lease rates of tenants and other financial details.
Matthews Investment Services has tendered an “offer to qualified buyers” potentially interested in acquiring “a best-in-class, super-regional mall anchored by Dillard’s, Bealls, Sears, Dick’s Sporting Goods, H&M and JC Penney,” according to a post on LoopNet, a real estate listing site.
The mall, which opened in 1980 and has been remodeled twice, features 697,000 square feet spread over 77 acres. The Matthews document states that more than 70 percent of inline stores, which excludes those scattered along the mall’s center walkways, enjoy average sales of $500 a square foot. The property attracts an estimated 6 million visitors annually.
Sears and the two Dillard’s locations in the mall are mentioned in descriptions of what the property has to offer, but both anchors own the spaces they occupy. The balance of the center, home to more than 100 retail and dining locations, belongs to Tennessee-based CBL Properties.
CBL spokeswoman Stacey Keating said in an email response to inquiries that the mall is not for sale.
“While we look at various opportunities as part of our normal asset review process, we have no plans to sell this property,” Keating said in her message. “We are committed to the Waco market and see a lot of opportunity for future growth at Richland Mall.”
Asked about the online presence of the “offering memorandum” from Matthews Investment Services, and after viewing a forwarded copy of the promotional brochure, Keating repeated her denial.
No one with Matthews Investment Services had returned calls by late afternoon Thursday. Mall manager Kandace Menning reportedly was out of her office and not available for comment.
Gregg Glime, a commercial sales specialist in Waco, said it is not unusual for real estate professionals to work behind the scenes to market property when a public announcement of its availability “might prove to be detrimental or perceived negatively.”
Glime said Richland Mall “is by no means dying.”
The mall’s recent commitment from Dick’s Sporting Goods “will attract a significant number of people and could snowball into a couple of other tenants,” he said.
Bland Cromwell, a commercial specialist who worked to attract lessees for Richland before it opened in 1980, echoed Glime’s assessment of the mall’s health.
“As a young broker, I worked to secure tenants for the mall back in 1980. Everybody was so proud of the place,” Cromwell said. “It is dated, but Dick’s gives it a shot in the arm and is good for other tenants there.”
He said going public with plans to sell a retail property “can make some people nervous,” and landlords may try to sidestep the fallout by keeping their intentions under wraps as long as possible.
Brad Davis, a commercial real estate specialist at Coldwell Banker Jim Stewart Realtors, speculated that ownership may want to part with the mall before anchors JC Penney and Sears, both facing companywide financial challenges, are forced to shutter their Waco locations.
“It is just a matter of time in both cases,” Davis said. “Brick-and-mortar retail sites are losing ground all the time.”
Any interest in acquiring the mall could come from a real estate investment trust, a vehicle for selling real estate-backed securities, Davis said.
Pat Farrar, a commercial specialist with the Reid Peevey Company, said malls are suffering nationwide, “but Richland seems to have been resistant to that trend and has held up pretty well, though it has lost some stores to Central Texas Marketplace,” the sprawling retail-and-restaurant center at West Loop 340, Interstate 35 and Bagby Avenue.
“I have clients in secondary and tertiary markets where malls have a lot of vacancies and are really struggling,” Farrar said. “But from what I’ve seen, they’ve done a good job of keeping Richland pretty full and healthy.”
The financial snapshot included in the Matthews Investment Services marketing material states the mall at Waco Drive and State Highway 6 has an effective gross income of about $9.5 million annually, compared with operating expenses of $3.2 million.
Those figures include revenues generated by restaurants on outparcels near the Waco Drive entrance to the mall, Farrar said after viewing the marketing brochure online.
“Put it all together and you’re looking at a sales price of between $65 million and $75 million, considering it’s a Class B regional mall with an 8 to 9 percent capitalization rate,” Farrar said. “It would be a little riskier asset by lenders just because of factors that have been discussed, including the financial positions of Sears and JC Penney. But a 98 percent occupancy rate is strong, stronger than most retail centers.”
The promotional material does not include an asking price. It does discuss Waco’s strategic location between Austin and Dallas, and the qualities of those metropolitan areas. It says of Waco: “The city’s economy has seen consistent positive growth for multiple years.”
The area in a 10-mile radius of the mall includes more than 200,000 people and enjoys a median household income of $62,000, according to the material.
It also mentions the arrival of the new Dick’s Sporting Goods store in spring of 2018, its annual lease rate growing from $270,000 in years one through five, eventually escalating to $360,000 if options are exercised in the later years of a lease agreement.