Value add

Like many older enclosed malls in economically challenged areas, DeSoto Square Mall has suffered mightily in recent years.

Tenants ranging from Macy's to Chick-fil-A have left the Bradenton shopping hub in droves, leaving vacancies and falling operating income in their wake.

Remaining anchors like Sears and J.C. Penney — both of which have struggled to maintain their own viability — haven't been able to generate new momentum for the 680,000-square-foot retail hub, either.

Former owner Simon Property Group -- the nation's largest mall owner — walked away from a $62 million debt on the property after determining DeSoto Square's value wasn't, and wouldn't be, anywhere near that level.

And with the October 2014 opening of the $315 million Mall at University Town Center, the death knell seemed to sound for the 43-year-old property.

Several analysts believe the mall today is worth about half the amount of Simon's debt, the result of further erosion of buying power by area residents. Current owner Mason Asset Management, of New York, bought the mall in 2012 for $24.6 million.

But that loss of value may, ironically, be the catalyst for a rebound at the 303 U.S. 301 Blvd. W. property — though the future of DeSoto Square may not be purely retail.

“I have a pretty positive outlook on that property,” says Patrick Berman, a senior director of capital markets investments for commercial real estate brokerage Cushman & Wakefield, in Tampa.

“It's the largest and most dominant retail property in a 10-mile radius, and it hits the middle market in Bradenton, which is the bulk of the population. They also have the advantage of being able to offer lower rents to tenants. There's a lot of upside potential.”

As retail sales have shifted online and new properties have emerged, 1970s' era shopping malls have often struggled to keep pace and remain viable. Nationwide, thousands of malls have either closed, been redeveloped or shut completely over the past decade.

Berman and others say DeSoto Square's fate may be linked to the resurgence in residential development that has permeated the Gulf Coast, and Southwest Florida in particular.

The 73.5-acre mall site might be ideal for apartments, especially in the wake of last month's $75 million acquisition of the ParkCrest Landings apartments, also in Bradenton.

Mall officials and an owner's representative are coy about the mall's future.

“We're looking into various options,” says Charles Emerson, a Mason Asset official. “There's going to be change coming, we just don't know what it's going to be yet. At one point, there was a discussion of selling, and then there was talk about developing a new marketing strategy to move the mall forward.”

Don Burrow, the mall's fifth general manager in three years, says an announcement on DeSoto Square's future will be forthcoming. He declined further comment, and referred inquiries to Mason.

Burrow, who became general manager in June, had been president and CEO of weapons training at Right on Target LLC before joining DeSoto Square, and was a security supervisor at Tropicana Products from 1994 to 2004, according to an online profile.

Selling remains an option. Hakimi Properties, a New York brokerage firm, has been marketing DeSoto Square for several months, according to its website.

It contends the mall, which has lost tenants like Aeropostale, f.y.e., Guitar Zen and is now roughly 70% occupied, has “in place” net operating income of $4 million annually.

If that figure is accurate, the mall would be worth about $36 million, based on capitalization rates similar malls have traded for nationwide this year.

Bradon Hakimi, whose firm is marketing DeSoto Square, declined to comment.

If Mason Asset does decide to redevelop the property, it might find inspiration in a handful of area malls that have been repositioned over the past decade.

In Sarasota, Australian-based Westfield Group is revamping its Southgate Mall into a lifestyle center, complete with an upscale movie theater and new restaurants.

In the Tampa area, Tyrone Square Mall and University Mall both are in the midst of major upgrades after losing value and tenants for years.

But perhaps the best regional example of a mall's turnaround can be seen at the former East Lake Square Mall, also in Tampa. There, owners converted the 1 million-square-foot property into the NetPark complex, which boasts one of the highest parking ratios of any office building along the Gulf Coast.

David Conn, a CBRE Inc. executive vice president and director of the retailer services group in the Southeast for the commercial real estate brokerage, in Tampa, agrees that DeSoto Square's situation may not be as dire as it appears.

“It's really hard to find 70- to 100-acre tracts,” Conn says. “That gives you enough land to create your own environment. Apartments would be great there, as could medical uses, a call center, even a college. I think its next life won't be as a mall, but it has parking and amenities in place, and any redevelopment could be phased.

“It's going to take some money, and it won't be easy, but there are viable options,” Conn adds.

- K.L. McQuaid