Near-term steps that maintain and increase options for the mall’s repositioning should be favored strongly over those that may limit options. For example, signing only short-term leases (one-year duration or shorter) is strongly preferred over signing longer-term leases. Avoiding major tenant improvement expenditures, especially in the south half of the mall, also is highly recommended. Both of these steps will help facilitate the sale of the mall at a reasonable price to a developer that might want to demolish the majority of the mall in order to construct housing or other uses in its place. Ignoring the above guidance may drive-up the acquisition cost of this problem-plagued asset sufficiently to scare away buyers who now see a larger investment requirement in order to properly reposition the asset. The recently signed church tenant likely will not attract a significant amount of new retail to the mall’s south end, and moving the church to a portion of the faltering nearby Cinemark 5 theatre, or elsewhere, would make sense. Similarly, spending a lot of money to build-out an expensive restaurant space near the middle of the mall, as has been proposed by one prospective tenant, would not be prudent if the mall’s future points toward redevelopment.
Pivoting to more-proactive steps, the City should commission a dynamic vision for the Mall’s future in order to set a general quality standard that it would like to see met. The CNU-CA has created such a vision on a conceptual basis as embodied by this report, and it can be expected to catalyze additional positive activity.
The City also should engage all five property owners including Mr. Zeng, Walmart, and the three separately owned outparcels. JCPenney also should be part of the discussions because the department store is the most important current mall tenant with the future in mind and the only remaining significant anchor. The City needs to understand each property owner’s (and JCPenney’s) perspective, goals, aspirations, and willingness to cooperate with the needed revitalization process.
The City of Woodland has multiple options to consider for its next major steps involving County Fair Mall. The actions that the City can take are best ordered from high-risk to low-risk in terms of the probability for a low quality, long-term solution resulting at the mall site.
Option 1 – Do Nothing
The City could do nothing, including making no changes to the zoning and exercising no proactive approach to the mall ownership nor to the selection of the ultimate developer. In this scenario, the City would wait for Mr. Zeng to make a move and then see what the eventual developer would propose to do. Unfortunately, this “reactive” option would make it more likely that a lower-quality outcome will result. Most developers, both local and national, only build single-use projects, and most such projects rate less highly from the standpoints of design, pedestrian accessibility, and sometimes other metrics. Such projects also ignore the industry trend toward urban, walkable, mixed-use places that emphasize a great experience. CNU-CA does not recommend this option.
Option 2 – Unilaterally Rezone the Mall
Rezoning County Fair Mall to enable the development of an urban, walkable, mixed-use project consistent with the CNU-CA’s plan would provide some of the needed entitlement to build this dynamic vision. Doing so would be better than doing nothing. However, on a risk-management scale, Option 2 is only marginally better than Option 1. While the City is being proactive by rezoning the property to encourage mixed-use and walkability, the City still will be reacting to whatever developer comes to the City with the desire to build a project. Since the strong majority of developers in suburban markets do not build high-quality, walkable, urban, mixed-use projects, despite significant market demand for them, the odds are fairly high that a residential developer will propose to build a residential component of lower quality from the standpoint of pedestrian functionality and architectural quality than what this report would envision. The needed re-envisioned retail component may or may not get built at the same time by another developer, and if it is built, it may be more suburban in format than urban, which again would violate the pedestrian-friendly orientation of the plan.
Urbanism enables walkability.
Furthermore, developers often do bait-and-switch with cities, either intentionally or unintentionally due to insufficient due diligence early in the process, leading to a disappointing development relative to initial, lofty expectations. The situation at County Fair Mall is even more tenuous because the current owner is not a developer and may simply desire to sell the investment. The City of Woodland should take additional proactive steps to guard against a bad outcome that is too likely to occur given the above circumstances, and thus CNU-CA does not recommend this option.
Option 3 – Negotiate Deal with Owner to Conditionally Rezone the Mall
It is recommended that the City not change the zoning of the property without an agreement with the owner that he will allow the City to spearhead a developer RFQ and RFP process. This way, the City ensures that all of the developers, or development teams, that come to the table by invitation are capable of developing a high-quality mixed-use project with strong walkability characteristics. Relatively few developers are capable of such projects, but the few that exist will be attracted to an above-average site in an appealing, well-located city that knows what it wants and that provides for a predictable outcome. While the City already may have told the owner that the City plans to rezone his property to accommodate the hot (but somewhat cooling) multifamily category, the City can go back to him and tell him that doing so will be conditional upon him allowing the City to spearhead the developer RFQ/RFP process to ensure a great project which—it must be noted—should create more value for him than just allowing a developer of typical suburban garden apartments to build their commonplace but non-aspirational product.
If the City doesn’t make the zoning change conditional upon City control of the developer RFQ/RFP process, there is a too-high probability that a lower-quality, non-walkable product will get built. The rezoning in exchange for City control of the developer RFQ/RFP process will be an excellent example of a public-private partnership. It is needed to lessen the chance that the owner, who likely is less motivated to build quality and primarily wants to rid himself of this money-losing asset, sells to a mediocre developer or partners with one. Clearly, the City will need to sign an agreement with the owner to ensure that he won’t sell the property to a buyer outside of the City-controlled RFQ/RFP process. If the potential for this Option 3 process to deliver more value to him is explained properly, this option should be appealing to him.
Option 4 – Negotiate Deal with a Prospective Developer to Conditionally Rezone the Mall
A variation of the first three options is for the City to hold-off rezoning the property, in part due to the mall owner’s unwillingness to fully engage with the City, until a suitable developer comes to the City with an interest in acquiring and redeveloping the property. The City can inform the developer that the City would be willing to approve the rezoning and other entitlements necessary to dramatically reposition County Fair Mall conditional upon the developer or development team building a project that is fully consistent with the urban, walkable, mixed-use vision and quality embodied in this report. While not as proactive as either Option 3 or 5 due to the presumed lack of a developer RFQ/RFP process, the City does retain some leverage because it will not have rezoned the property without securing a developer commitment in advance. Thus, this option is preferable to Options 1 and 2 from a risk standpoint.
To guard against “developers” that regularly acquire, entitle, and then flip properties to other, non-vetted parties that will do the actual development, the City will want to have a tough development agreement that guards against such behavior.
Option 5 – City Options the Mall Prior to Rezoning
If the owner does not want to go with Option 3, above, then Option 5 will reduce the risk of a poor-quality project even further by having the City negotiate an option to purchase the owner’s portion of the mall property—but without necessarily going through the full purchase process. Tying-up the property today should lock-in the value at close to today’s valuation, before any zoning change, and then allow the City to rezone the property and to spearhead the developer RFQ/RFP. When that process is completed, the City’s option to purchase either can be sold to the eventual developer as part of a new development agreement, or the City can close on the acquisition of the property and then immediately sell the property to the chosen developer, again as part of a new development agreement. Optioning a property costs a tiny fraction of what it costs to close on the purchase of a property, but it gives the City virtually the same control over the disposition of a property for a specified period of time and it reduces the risk of a bad built outcome to the maximum extent possible. The City may be able to identify an angel investor from within the community who will provide the resources needed to enact the option. If properly handled, the owner should be pleased by the option to purchase in conjunction with the subsequent RFQ/RFP process (assuming a reasonable timeline). This option gives the City the most control to ensure a high-quality outcome.
The proactive leadership inherent in Options 3 and 5, or a smart, creative variation of them, is what the City of Woodland should focus on providing if it is serious about controlling its destiny and securing a high-quality outcome at the County Fair Mall site. The City simply is providing a needed transitory assist and the important predictability to ensure that a more sophisticated private sector developer can re-position this mall asset appropriately. Option 4 also has the potential for a desirable outcome, albeit with higher risk for a lesser result due to the presumed lack of a competitive RFQ/RFP process.