NORFOLK, Va. (WAVY) – The city of Norfolk is on its way to being the owner of yet another shopping mall after City Council voted to allocate up to $18 million to acquire the troubled MacArthur Center in the heart of downtown.
The vote was 7-1 to buy the property in a special called meeting Wednesday afternoon. City Council also voted unanimously to approve an operating and consulting agreement for the sprawling facility.
If the purchase is completed, the city as well as the Norfolk Redevelopment and Housing Authority will control the majority of the more than 21-acre site. Dillard’s will still own its store.
Mayor Kenny Alexander said the transition from the current management team to the next should be “seamless” and that the purchase is “good for the city.”
“We will own everything but the Dillard building. That puts the city in the great position to work with Dillard and other tenants in the mall to continue to operate the facility as a mall, but more important, to have continued dialogue on the future of MacArthur Center,” Alexander said. “Downtown is an economic engine for the rest of the city, but this is a strategic purchase. It’s a great component for our overall plan for downtown.”
In the short term, the plan is to continue operating the property as a shopping center, but it became quite clear ahead of the vote, people want to know what is next.
In 1994, the city of Norfolk agreed to spend nearly $100 million as part of a roughly $270 million public-private partnership with the Taubman Company to construct the mall.
The purchase price for the nearly three decades later is set at $11.1 million, roughly $14 million less than its most recent city assessment.
The mall’s future has been a highly discussed topic in the city since one of three anchor tenants, Nordstrom, closed in 2019 after completing its one and only lease. Since that time, dozens of other retailers have left, one over safety concerns, and the former owner defaulted on their loan and sent the property into receivership.
As of last month, the occupancy rate for the mall was just below 58%, according to court records.
Declining foot traffic has been mostly attributed to competition from online shopping and other local retail opportunities.
Still, Alexander said it was important for the city to take action.
“I think it’s important,” Alexander said. “MacArthur Center is very instrumental to our downtown, it’s in the heart of our downtown, so for the city to be at the table, to be a strategic partner in the MacArthur Shopping Center, I think it’s important for the city and the community to invest in our downtown.”
The city, which has formed the company MacArthur Center Acquisition LLC to purchase the property, will hire GEI Advisors LLC to manage the property. Travis Goad is the name who signed on the documents and during Wednesday’s meeting, City Attorney Bernard Phisko explained they are not a local company.
“GEI is an entity that is not local that we identify as being quite qualified to help us in our endeavor to purchase the mall,” Phisko said. “One of their pieces of advice was that we would be able to get their property for a lower amount if we were willing to have a shorter-due diligence period.”
It was revealed in court documents that the city was one of only three bidders.
There was no immediate explanation of where the nearly $7 million difference might go, between the $18 million the city allocated and $11.1 million purchase price. Calls to Phisko’s office for comment were not immediately returned.
However, the quickness of the council’s action on the asset is something that several community members took issue with. So did Councilman Tommy Smigiel. He was the lone “no” vote.
“I’m keeping a scorecard,” Smigiel said, “on how much money is being spent downtown versus the rest of the city.”
In the last year, considerable attention has been focused on downtown Norfolk following several violent incidents.
Smigiel also takes issue with the lack of tax relief in the upcoming budget that is set to be voted on Tuesday, while at the same time, there are plans for $12 million in upgrades for Half Moon Cruise Terminal.
“When there is a project urgent like this downtown, we move mountains and schedule emergency meetings to vote on it,” Smigiel said. “That is something that has to change.”
Unlike when the city’s economic development authority purchased a majority of Military Circle Mall in 2020, Alexander said there are no current plans for redevelopment.
“No, we don’t have those plans,” Alexander said. “There’s not been any presentation to do anything with the mall, but it’s important for the city to be a strategic partner in this acquisition. So the city is stepping up, it’s a strategic acquisition. I think it’s good for the city.”
There have been recommendations made, however, as part of amendments to the downtown Norfolk plan that Alexander voted to approve in 2020.
The plan called MacArthur Center, which opened in 1999, a “catalyst for 20 years of development downtown,” but also added that “in the course of the first two decades of the 21st century, retail changed so dramatically that MacArthur Center needs to be reconceived.”
The plan calls for the city to explore three options.
One includes limiting retail to the ground floor of the three-story structure and putting office space above. Another option calls for the conversion to an outdoor mall scenario. The third calls for the mall’s demolition and replacement with an “urban district with a street pattern that reopens Bank and Court Streets to connect Scope and Chrysler Hall with Main Street and the Waterfront.”