Senior housing eyed at Merle Hay office towers, owner says
Mall owners also plan to buy former Sears building site
KATHY A. BOLTEN Oct 16, 2020 | 5:43 pm
4 min read time946 wordsAll Latest News, Real Estate & Development
Merle Hay Investors LLC has reached an agreement to buy the vacant Merle Hay Mall building that had been home to Sears department store for $2.8 million. Photo by Joe Crimmings
The owners of Merle Hay Mall plan to sell the office tower attached to the northwest Des Moines shopping center with hopes the six-story structure will be converted to senior housing, the Business Record has learned.
Converting the tower’s primary use to senior housing is among the changes under consideration by owners Merle Hay Investors LLC, managed by Elizabeth Holland, whose grandfather, Joseph Abbell developed the mall and whose family is a majority owner.
Holland has asked the city of Des Moines to reallocate a portion of tax increment finance dollars designated for mall redevelopment to instead go toward acquisition of the structure in which the Sears department store was previously located. The City Council had approved allocating $4.6 million in tax increment toward redevelopment costs.
The council on Monday will consider Holland’s request to instead allocate $400,000 toward the purchase of the vacant building.
The Polk County Board of Supervisors in October 2018 approved lending Merle Hay Mall owners $2.5 million to acquire the Younkers and Sears properties. That amount was increased to $3.5 million. The board recently agreed to add another $400,000 if Des Moines allowed tax increment finance dollars to also be used toward the purchase, according to a city document. If the council approves the request, Holland said the transaction could be closed sometime in November.
Redevelopment plans for the site include razing the former Sears building and constructing an open-air strip shopping center there, Holland said.
“Merle Hay Road is still a very desirable retail corridor,” Holland said. “We’re excited about making that site another opportunity for retailers that aren’t currently in that trade area.
“We don’t anticipate having a challenge finding retailers to go there.”
Sears closed in 2018
The Merle Hay Sears closed in October 2018, the day before its parent company, Sears Holdings Inc., announced its bankruptcy. About 45 days earlier, the parent company of Younkers closed the chain’s department stores.
Younkers and Sears were both original tenants of Merle Hay Mall, which opened in 1959 as an open-air shopping center. Sears anchored the north end of the mall; Younkers the south end.
Younkers later moved to a building on the west side of the mall. In February 2018, Holland, through Merle Hay Investors LLC, purchased that Younkers building from a liquidation company for $1.5 million. The purchase was made possible by a loan from Polk County. The building, which is vacant, was valued in 2018 at $5.5 million, according to the Polk County assessor. It’s now valued at $1.5 million.
Holland has pursued buying the Sears building since 2006. It is owned by TF Des Moines Iowa LLC, which is managed by an Illinois-based holding company.
The building’s asking price, before Sears closed, was out of reach, Holland has said previously. In early 2018, the 225,711-square-foot store, which sits on 12.8 acres, was listed for sale at $5.6 million.
A year ago, Holland said she was close to reaching an agreement with the building’s owners but reached an impasse over the cost of remediation of asbestos that is in the structure. “Our discussions fell apart,” she said. “However, in a post COVID environment, they’ve gotten a little more rational.”
Holland said she’s reached an agreement to buy the building for $2.8 million.
Once the transaction is complete, the building will be torn down, likely in the first half 2021, she said. Construction of the strip center could be completed in 2022 or 2023.
Vacant Younkers store
Holland said a plan is being developed for the former Younkers building site, which was constructed in 1999.
“We do not anticipate taking that store down,” she said. “We’re working on a plan to reuse that building.”
Holland didn’t go into specifics of uses for the former department store site.
Still, she said, “These kinds of big projects need to create reasons for people to come to them in ways that they didn’t used to have to do. … We think we have a great opportunity to free up these anchor spots and create something new and different.”
Abell Credit Corp., of which Holland is CEO and general counsel, specializes in retail and office space development and management. The group, she said, has limited expertise in housing.
That’s why the group recently sold a nearly 2-acre portion of mall property to TWG Development LLC and the nonprofit Dream Catcher Inc., who are partnering to create affordable housing on the site. Grading and other construction work on the site has begun.
Holland said the Merle Hay office tower will soon be listed for sale with the hope that it will be converted to senior housing.
“We think that is the best use for that location,” she said. “Imagine folks who may not be able to drive anymore being able to walk inside to a grocery store or other shops. We just think that would be a good use for the tower.”
Related article: Elizabeth Holland was a keynote speaker at the 2019 Iowa Commercial Real Estate Association Expo, during which she talked about Merle Hay Mall, its beginnings and how Sears became a tenant. “Merle Hay Mall was the first iteration of Sears acknowledging that they would be part of” a shopping center, she said during the Expo. To read more, click here.
Site work has begun on a parcel where an affordable housing project will be constructed, just west of Merle Hay Mall in the 6300 block of Douglas Avenue. Photo by Joe Crimmings