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Jax Daily Record Thursday, Feb. 28, 201904:20 AM EST

Regency Square Mall owner considering selling property

Five years after being sold to a New York investment group, the shopping mall is emptier, embroiled in lawsuits and now the owner is exploring options.
by: Max Marbut Associate Editor

When Regency Square Mall was sold five years ago this month, there was optimism that the new owners might bring revitalization to the Arlington landmark that was the largest enclosed shopping mall in the Southeast when it opened in 1967.

That hasn’t happened.

However, ownership said Wednesday that it is exploring options, including selling the property.

“We understand at the moment that the mall needs to be rethought as to where this property will go in the next 50 years,” said Elliot Nassim, president of Mason Asset Management.

“We are looking at all options. We feel that these malls are in well-located areas within the cities and they evolve, so we want to think with an open mind as to what else it could become,” he said late Wednesday.

Nassim said the ownership group will consider selling the asset and is discussing the mall property “with several interested parties for different uses.”

Nassim said his group would keep in touch with the city and neighborhood groups about the plans.

“We want to do what’s best for the city and the area,” he said.

A partnership of Mason Asset Management and Namdar Realty Group LLC, both based in Great Neck, New York, paid $13 million Feb. 14, 2014, for the mall. At the time, the property was assessed at more than $30 million.

The companies specialize in acquiring aging shopping centers and regional malls.

Trash cans placed in walkways to catch water leaking through the roof and “wet floor” warning signs stand in a nearly empty wing of Regency Square.

According to Mason Asset’s website, the company was founded in 2010 and has grown to own and operate more than 120 shopping centers in the U.S., including 45 regional malls similar to Regency Square.

The website indicates that Mason Asset Management looks for centers of at least 50,000 square feet that can be purchased for $1 million or more and the company is “aggressively looking to acquire” and “willing to accept ANY type of risk.”

Profit for investors

When Regency Square opened nearly 52 years ago, it was filled with more than 100 department stores, boutiques, specialty retailers and food vendors from full service to fast food.

By 2012, occupancy had dropped to 60 percent. Two years later, when Mason Asset and Namdar took over, the seller, General Growth Properties, reported it was about 38 percent occupied.

In the past five years, Sears Roebuck & Co. closed its store at the west end of the mall and Belk closed its department store in the center of the mall and moved into a new building at Atlantic and Kernan boulevards.

The Dillard’s department store at Regency was converted into a clearance center that’s open six days a week.

Smaller national-brand stores left Regency in favor of locations in nearby shopping centers, including Kay Jewelers. It soon will be followed by Foot Locker and Champs, which are building-out retail space across the street from Regency Square.

Many locally based small businesses also have closed their stores at Regency Square and just two food vendors and a frozen-coffee shop are the only options remaining in the mall’s food court.

While the tenants have been dwindling, Mason and Namdar more than doubled their initial investment about a year after they acquired the 900,000-square-foot mall on the 110-acre site.

In 2015, the AMC Regency 24 movie theater outparcel was sold to a theater-ownership group for $26.2 million.

In 2016, Impact Church of Jacksonville Inc. bought the former Belk store for $7 million.

While Mason Asset Management lists the mall at 1.39 million square feet in marketing materials, the size is smaller when the separately owned Sears, Dillard’s and former Belk properties are taken out of consideration.

The ownership group appears to control about 1 million square feet and that appears to be less than 50 percent leased.

Mall owner sued

In the past five years, Regency Square has become the focus of litigation. 

Two prospective tenants who signed leases since the sale, but didn’t open their businesses, wound up in court with the owners, contending that the landlord didn’t meet the terms of the leases regarding the mall’s suitability for occupancy.

On Feb. 1, JAAMM Inc., a Jacksonville corporation that proposed opening an automobile and motorcycle museum in the former Montgomery Ward store at the mall, was granted a final judgment of foreclosure for a $135,000 mechanic’s lien and other costs totaling nearly $163,000.

The company filed the lawsuit in June 2017, alleging that the landlord did not repair roof leaks and failed to reimburse JAAMM for improvements it had made in the space.

To satisfy the lien and foreclosure, the mall is scheduled to be auctioned March 21 by the Duval County Clerk of Courts.

The landlord disputes the final judgment and has filed a motion for a rehearing that was pending as of Wednesday.

Nassim said Wednesday the property will not be sold at the  “sheriff’s sale,” but declined further comment. “I generally don’t comment on pending litigation,” he said.

Another lawsuit was filed in July 2017 against Regency’s owners by International Decor Outlet LLC.

It was a Jacksonville company that in November 2015 negotiated a 10-year lease beginning in April 2016 for nearly 200,000 square feet in the west wing of the mall.

International Decor’s plan was to sublease the storefronts to third parties that sell home furnishings and home improvement products, as well as to a sports-themed restaurant.

According to the lawsuit, after executing the lease agreement, the landlord denied access to the space, making it impossible for IDO to show and market the storefronts to potential tenants.

In addition, the complaint alleges that the air conditioning did not work and the landlord failed to repair it; that there were “significant and multiple roof leaks” in the space; and that reasonable housekeeping and security services were not provided.

The lawsuit seeks a jury trial to recover damages and cancel the lease agreement. The next pretrial hearing is scheduled in May in circuit court.

The landlord’s attorney, Patrick Coll with Smith Hulsey & Busey, did not respond to an email requesting comment.

Tenants talk future

Jim Robison opened Regency Health Foods in the mall in 1978.

He said the owners maintain the property reasonably well, but they haven’t been able to replace tenants that have left the mall, and the high vacancy rate has led to fewer people shopping at Regency Square.

“We don’t have the traffic. We need more shopping options,” said Robison.

“The overall condition of the building is not bad,” said Tom Phillips, who opened his Sports Mania team apparel store at Regency four years ago.

Both business owners believe if Regency Mall is to improve, it will take more stores and more involvement with the community.

“There has to be a clear plan and vision for Regency. That will take Namdar and the community coming together,” said Phillips.

“I’d like to see more public events in the mall,” Robison said.

“Regency Square has good memories for me. I wish it would turn around.”

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