Market Considerations

CNU-California Member, Richard Hunt of Peloton Research Partners, conducted an initial market review for the prospects for new mixed‐use development at the County Fail Mall site. We examined the existing conditions of the mall property and reviewed the current demand for a variety of uses that would complement the site as a re-purposed or redeveloped infill property. Some initial key findings of importance to the evaluation of the mall redevelopment opportunity are as follows:

• Vacancy rates at the subject mall property appear to be trending upward while net operating income has declined;
• Weekend foot traffic at the mall is very low and operators appear to have varied operating hours;
• The County Fair Mall is showing the normal signs of decline found for this asset class at this stage of its life. New regional retail and on‐line shopping growth has helped accelerate the decline in the mall’s activity;
• The fate of major anchors at many mall locations is currently in question. This would include the Burlington Coat Factory anchor at the subject mall;
• The exception is the attached Walmart Neighborhood Market which appears to be well‐supported by local shoppers and can stand alone;
• A clear shortage of housing exists across most housing types in the City of Woodland;
• Housing with the most demand includes both market‐rate and affordable apartments (for‐rent), entry‐level single‐family detached, and single‐family attached homes (for‐sale);
• Renter households make‐up at least 45% of the housing tenure in the City of Woodland and yet since 2011, less than 15% of new housing units have been multi‐family units. The most immediate opportunity at the County Fair Mall site is the development of new multifamily units;
• Mall redevelopments tend to attract renewed interest in retail growth, though typically in a more entertainment and dining oriented format. The County Fair Mall site is well‐suited to attract these uses as well as both personal and professional service users; and
• A number of existing tenants at the County Fair Mall have expressed interest in staying at the mall location should the economic opportunity exist. Smaller‐scale liner buildings with greater auto and pedestrian exposure could help increase the opportunity for greater retail success at this location.

These initial findings provide some initial insight into the redevelopment opportunity at the County Fair Mall site.

Implementation Context

CNU-California Board Member, Matt Shannon, Presented the Following Implementation Recommendations:

Some Fundamentals

The County Fair Fashion Mall represents an outstanding, once in-a-generation major redevelopment opportunity to the City of Woodland. But this is not immediately apparent when one visits the mall today.

The mall shows multiple signs of being in a steep economic decline. Conventional malls like County Fair rely on strategically located department stores to drive the majority of the interior customer traffic and sales. Unfortunately, three of the mall’s four anchors are either closed (Gottschalks) or involve discounters that are not department stores, and one of which is partially vacant (Burlington Coat Factory) and thus does not qualify as a full anchor. The other discount anchor, a Walmart grocery store, does a strong business but unfortunately sealed-off its access point to the mall—with very negative ramifications to the center—and as such, does not function as an anchor for this enclosed mall.

This leaves only JCPenney to carry the burden of driving the mall’s interior traffic, which is too much to expect from one anchor, particularly one that is part of a chain that is facing challenges nationally (though this JCPenney store supposedly is performing at an above-average level relative to other JCPenney stores). The mall interior’s in-line stores reflect the above situation, with about a 70% vacancy rate. The in-line shops at the south end of the mall near the vacant Gottschalks and partially vacant Burlington are mostly dark, and lower-performing and frequently non-retail in-line stores and scattered vacancies prevail in the northern half of the mall. Malls with such a high percentage of non- or low-performing stores, and so few retail stores, tend to be on the verge of closing. County Fair Mall is functionally obsolete and at the end of its useful life in its current configuration, but its current challenges are setting the stage for the property’s Renaissance. In keeping with industry trends and best practices, it is time to aggressively explore alternative configurations and use mixes at the property—something that the CNU-CA team has done.

County Fair Fashion Mall is fortunate to have some significant assets:

1. Location Works for Retail – Since the mall’s opening over 30 years ago, the location has proven to be successful for retail. This is important and means that future visions for the property can include some quantity of retail with confidence. Indeed, the Walmart grocery store is performing strongly and would be a great amenity for new nearby residential units. In addition, the JCPenney should be able to survive as a standalone department store close to the Walmart.
2. Significant Majority Owner – The entire mall property, including all anchor parcels except Walmart and excluding three outparcels, has a single owner who owns around 75% of the site. Related to this, most mall tenants have relatively short-term leases. These two factors will simplify the disposition process should the current mall owner desire to sell or redevelop a major portion of the property.
3. Reasonable Title Encumbrances – The title encumbrances on the mall parcels, based on a preliminary investigation by CNU-CA, are relatively light and significantly less restrictive than at some other shopping centers, which again will help facilitate redevelopment.
4. Busy Bus Terminal – The mall is home to the busiest bus terminal in Woodland, with 94 buses per day. This impressive transit connectivity is important and should be integrated into any redevelopment plans.
5. Great Location – The mall is very well-located from a regional standpoint by being adjacent to an active rail line and sandwiched between the Yolo County Fairgrounds and a vacant parcel (estimated 40 acres), with the Woodland Community & Senior Center and Woodland Sports Park also nearby. Downtown Woodland, a walkable mixed-use district, is a little over one mile to the north. A major interchange for Route 113 is less than one-half mile to the east, and 113 connects to I-5, which is about two miles from the mall. UC Davis is less than 10 miles to the south, and Sacramento International Airport is about 11 miles east of the mall. Downtown Sacramento, the state capitol, is 20 miles to the Southeast. The last three destinations are accessible via highways.
6. Short Drive to UC Davis – The neighboring City of Davis has become resistant to growth, and the majority of the 10-mile drive to UC Davis is through farmland that the Cities of Woodland and Davis would like to preserve as agriculture rather than to fill-in with development. These factors in combination with the relatively fast-moving and direct Route 113 between Woodland and Davis mean that the mall site and the vacant parcel south of the mall realistically can contemplate redevelopment strategies that may be complementary to or support UC Davis’s aggressive growth plans.
7. Ripe Market for New Residential Product – There has been extremely little multi-family development in Woodland in recent years. The City has not participated in the apartment development boom that has been taking place around the country since the recession and now is beginning to cool a bit. This means that the Woodland market is starved for new high-density housing options, and that bodes well for the potential success of a major residential component to the mall’s redevelopment program. A diversity of unit types and sizes is recommended.

Risk Management

County Fair Fashion Mall is at a pivotal moment in its existence. As noted, the property’s initial enclosed-mall format has run its course over 30 years, and the noticeably asset needs to be repositioned. This is occurring at a time of unprecedented tumult and change in the retail sector, with the growth of Amazon.com and other online competitors threatening the survival of many bricks-and-mortar retailers. These trends are making clear that radically different solutions for struggling shopping centers like this mall must be envisioned.

With all of this change underway, there is much risk for failure. A wide range of outcomes is possible including further decline. The mall’s current owner continues to intermittently list the property for sale while maintaining as much retail viability as possible. A developer with asset-repositioning savvy and resources will be required to return the property to prosperity. A solution involving a mix of uses to offset the reduction in retail is highly likely, and very few developers are expert at high-quality mixed-use development due to its complexity. The City has the power to establish land use and entitlement, and Woodland should not be shy about using all resources within its powers to ensure a positive outcome to the property’s transition process. Only by being proactive will the City be in control of its destiny and reduce the likelihood of a bad outcome at this large, important site.