The Shops of Grand Avenue, located at 275 W. Wis. Ave., is being sold to a subsidiary of the lender, 275 West Wisconsin Holdings LLC.
The lender offered the only bid for the mall at a foreclosure auction last Monday. Wells Fargo, acting as a trustee for a Bank of America commercial mortgage trust, bid $8.5 million for the mall.
In 2005, the mall was purchased for $31.7 million by New York-based Ashkenazy Acquisition Corp. In 2010, Five Mile Capital took control of the property after Ashkenazy defaulted in $10 million in mezzanine debt. Mezzanine debt refers to unsecured, higher yielding loans that rank above equity but are subordinate to bank and secure loans.
Mark Eppli, interim dean of the College of Business Administration, compared this process to buying a house.
“When I buy a house, I buy it on the ability to pay my mortgage,” Eppli said. “I continue to pay mortgage to buy a boat or pay for my child’s education, and if I lose my job or my income goes down, I default. It becomes the right of the lender to take that property, and they have every right to do that.”
He added that Bank of America will hopefully add value to the property before selling it later.
“When the default happens, the second loan has the opportunity to pay off the first loan,” he said. “If they won’t want to do that, they give up the property. Bank of America had a foreclosure sale to another investor. There were no credible bids, so they will retain ownership and work to increase value, work on property and sell it at a later date.”
The mall spans three city blocks and features Milwaukee’s largest food court. Its website says more than 5.5 million people visit the mall each year. In January 2011, the mall reported a 63 percent occupancy rate to The Business Journal, meaning 63 percent of the space in the mall was filled with businesses.
“When you look at how malls operate, two or three anchor tenants create a draw,” Eppli said. “In 1998, Macy’s pulled out of Grand Avenue, and Borders took its place. When Borders left, Planet Fitness occupied the space. Macy’s brought a lot of traffic, Border’s brought some traffic and Planet Fitness isn’t really bringing much traffic to the space.”
The Shops of Grand Avenue mall is familiar to many Marquette students.
“Last weekend I went to T.J. Maxx, but I didn’t visit any of the other stores at the mall because I was searching for a specific item,” said Kate Anderson, a freshman in the College of Arts & Sciences. “As a college student, I am looking for inexpensive items of a specific nature, and most of the stores there didn’t offer that.”
Some argue the mall could benefit from taking advantage of the many college aged students in the area. Within a five-mile radius of the mall, there are 15 colleges and universities, including Marquette, the University of Wisconsin-Milwaukee, Milwaukee Institute of Art and Design and Milwaukee School of Engineering. These universities total a student population of more than 100,000.
“That mall would definitely do better if it was geared toward college students, but I feel like it definitely isn’t,” Anderson said. “They have a wide variety of shops but not a lot that I would necessarily shop at. They don’t really call to our generation.”
The mall’s spokesperson was unable to comment when contacted for a statement regarding a change in ownership.
Anderson offered ideas of stores she’d like to see at the Shops at Grand Avenue.
“A Bed, Bath and Beyond-type store that sells appliances and things that college students forget to ask their parents for at the beginning of the year,” she said. “The mall is conveniently located for the entire campus. It’s easy to get to, especially during the winter. I’d want to see places that sell inexpensive but quality clothing, and maybe a grocery store. And a Target! That would be amazing.”
Eppli said adaptive reuse, or filling the empty space in the mall with services and other non-traditional uses, could help the mall begin a rebuilding process.
“If they get the price down to a low enough point, so the rent can be paid by smaller occupants, they can begin the rebuilding process,” Eppli said. “The mall has been working with local entrepreneurs, including Sprinkler, a startup company that fosters entrepreneurial startups at very low rents. If the companies start taking off, they can start paying more rent and bring more traffic to the mall.”