Mike Kohan has made a career of buying distressed shopping centers, including the recent purchase of the bulk of the struggling Burnsville Center.
Kohan, who leads New York-based Kohan Retail Investment Group, plans to again increase the number of tenants, partly by catering to smaller, local businesses.
Similar to plans at other Twin Cities malls, he also wants to recruit more entertainment options to Burnsville and possibly apartments to some of the land surrounding the mall.
"Malls cannot be treated as they used to," Kohan said last week. "Because if you treat them as you used to, then you are not going to get anywhere."
Kohan said there's not a day that he does not wake up thinking about how to reinvigorate malls. He and his company, though, have a purchasing history checkered with reports of mismanagement including unpaid taxes, delayed maintenance and other issues.
His group owned Northland Mall in Worthington, Minn., but it fell under disrepair and lost tenants. Eventually the mall was closed and razed. He has been taken to court for unpaid bills and delinquent taxes at other malls.
Kohan in the fall bought the debt for Burnsville Center, minus the anchor-store properties that are separately owned, at auction for about $17 million.
Despite his companies' mixed record, business owners and city officials remain optimistic that Burnsville Center can rebound with the right investments from Kohan's group.
The mall opened in 1977 to large crowds of visitors on its first day, according to a story in the Minneapolis Tribune. Traffic at one point was backed up on I-35W from County Road 42 to Hwy. 13.
The mall opened with 95 stores, with room for a total of 165. Currently, there are 85 listed on the mall's website.
Like other regional malls, as anchor department stores have run into trouble, Burnsville suffered.
Sears left in 2017. Gordmans permanently closed last year.
Macy's sent notice last spring that it would close though that may not be for a while and could possibly be put off if the mall could generate more traffic, Kohan said.
The jury is still out on J.C. Penney, which filed for bankruptcy last year and announced the closures of numerous stores.
The coronavirus pandemic exacerbated the retail disruption — especially among department stores — that already has hit shopping malls hard. Even at upscale malls such as the Mall of America, many tenants weren't able to pay their rents, causing the shopping centers to fall behind on their mortgages.
Last year, in the three months ending June 30, Burnsville Center income declined 32% because of store closures and rent reductions exacerbated by restrictions tied to the pandemic, the mall property's former owner — Tennessee real estate investment trust CBL Properties — said in public filings.
CBL started missing its mortgage payments for the mall in April, according to loan data firm Trepp. The company had been in talks with lenders to try to modify the loans of the Burnsville Center and several of its other malls. But in the end CBL put the general mall portion of Burnsville up for auction in October as part of foreclosure proceedings.
Kohan submitted the top bid of about $17 million for the $63 million mortgage, resulting in a loss of more than $45 million for the loan's bondholders, Trepp said. The collateral for the loan had been valued at more than $137 million in 2010.
Kohan envisions short-term, one-year leases for small businesses such as a local tattoo shop that might not have had an opportunity to have a space in the mall before.
The empty Sears store, which Kohan doesn't own, could be a good space for an entertainment option or other uses, he said. He has incorporated alternative uses at his other properties such as call centers, mini storage and medical facilities, he said.
The city of Burnsville finalized a vision plan for the Burnsville Center and surrounding area in 2019 that included a more pedestrian-friendly area with a mix of uses such as housing, and possibly parks, hotels and other commercial spaces.
"I am seeing transformation and reinvigoration happen at the other malls. … I would love to see that happen in Burnsville as well," said Regina Dean, Burnsville's assistant community development director.
Logan McKee — owner of Games by James, which has stores at several Minnesota malls including Burnsville Center, Southdale Center and Rosedale Center — remembered how popular the Burnsville Center was during the 1990s when he was young.
"I would be happy with any new exciting activity in the center," he said.
The Burnsville games store has consistently performed well during the pandemic, even better than other locations such as the Mall of America, possibly because customers feel safe to visit knowing the Burnsville Center won't be crowded, McKee joked.
McKee said he would like to see more tenants including food vendors as well as engaging entertainment such as laser tag or mini golf.
"The people that are coming to malls are looking for the hands-on experience," he said.
Dan Lieberman — co-owner of Lieberman Cos., which runs Playland Arcade at the Burnsville Center and other malls — said he hopes the new ownership invests in the mall and brings in tenants that will generate foot traffic even if they aren't traditional mall retailers.
"Time to get creative," he said, in an e-mail.
Kohan Retail Investment Group lists more than 35 properties on its website. Some of those properties have had some successes. At the Southbridge Mall in Mason City, Iowa, a hockey arena was built to take the place of a vacant retail anchor.
But Kohan, also known as Mehran Kohansiek, has had well-documented issues at other locations. At the Southbridge Mall, there were reports of delayed maintenance and several instances of back taxes being owed.
Chapel Hill Mall in Akron, Ohio, which recently lost its last anchor tenant, faced foreclosure over unpaid taxes, but proceedings were temporarily put on hold last year because of the pandemic, according to a story in the Akron Beacon Journal. Kohan was also sued by electricity providers for the mall.
In Clay, N.Y., Kohan owes about $4 million in taxes on the Great Northern Mall, which lost a large number of stores last year, according to the Syracuse Post-Standard.
In Worthington, Kohan bought the Northland Mall at the end of 2008 for $1.8 million, according to the Worthington Daily Globe. Over the years, the mall deteriorated with reports of leaks that would require buckets to be lined up along its floors, according to a report by WCCO. Businesses left one by one. The city took Kohan to court after the mall's vacant Kmart building was deemed hazardous. Eventually the mall was demolished.
"When you buy malls with problems, the problems don't go away," Kohan said about reports of his troubled properties. "The problems will be there and sometimes those problems get to the point where there is no way of return."
While vacancy continues to be an issue for the center, there could be some light at the end of the tunnel.
Foot traffic was actually up 21% in February 2020 before the onset of the pandemic in comparison with the same time the year before, reported research firm Placer.ai.
"Looking at their recovery shows a promising picture, as visits continued to make significant leaps back to normalcy before a resurgence of [COVID-19] cases in November," said Ethan Chernofsky, vice president of marketing at Placer.ai. "Even the slight tightening of the visit gap in December is a sign that the recovery could be rapid once COVID cases come under greater control."
In Burnsville, city officials are trying to remain optimistic, Dean said.
"We are staying positive and hopeful that they are going to be a responsible business owner," said Dean, who has connected with Kohan recently over the phone. Kohan said he is ready.
"I'm very excited to be part of that community to do whatever possible to do the right thing for the community," Kohan said.
Nicole Norfleet • 612-673-4495
Twitter: @nicolenorfleet
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