Breaking Down the Golden Triangle's Leigh Mall

"If you build it, they will come," said some lunatic. While Kevin Costner's Field of Dreams quote is largely true, it fails to account for what comes after the shine wears off.

Earlier in this year, I tried super hard to structure a deal around the Leigh Mall in the Golden Triangle of Mississippi. The mall is on some of the most highly trafficked areas of Columbus, Mississippi, which sits in the middle of the "Golden Triangle," a moniker assigned to the tri-county area that houses the Columbus Air Force base, Mississippi State University, and several industrial manufacturing and processing centers.

A broker shared the property with me prior to its being auctioned on (the very cool) Ten-X platform. To me, the property was full of promise–a 30-acre, highly visibly site, showing $460K of in-place income in an active area of Mississippi brimming with pro-business forces, like Joe Max Higgins. Leigh Mall was built in the 1950s with Sears and J.C. Penny as the anchor tenants, at a time when the big box shops were prized commodities. By the dawn of the Internet, when the useful lives of the roofs and the electric and the plumbing ran out, mall owners all over the US were facing similar issues – how to handle vital repairs when the anchors didn't pay sufficient rent to cover the CAM deficits and tenants were scrapping to turn a profit. This particular property was in a portfolio of twelve total malls that collateralized a Security National Properties' $34.7 million loan, which fell into default.

I believe that, to maximize the value of the property, the owner will have to "de-mall" the property and develop its northern perimeter with mixed-use residential and commercial spaces. My thinking was based on a combination of the building's current occupancy (57% at the time) and the remaining tenants, which included Hobby Lobby – a recognizable anchor with a reputation for leveraging circumstance to take advantage of desperate landlords and value-add traders. To properly demo the mall around the existing tenants and to re-position the property to accomplish this business plan (including carrying costs and rezoning) could cost $1.5-2 million over and above the cost of the land. As a result, I saw the property as being worth about $3M, but I couldn't find partners with whom to do the deal. It ultimately was auctioned for $3.5 million to the Augusta, GA-based Hull Property Group.

If Hull has sufficient liquidity to fund necessary work, I think this property has a ton of potential. However, the perils of the Golden Triangle are not to be ignored. This is certainly small-town rural America, without public transportation and other economic drivers that could stimulate development. Due to the lack of development in many places, the Golden Triangle actually employs people from 37 counties between Mississippi and Alabama. A great number of well-paying manufacturing jobs are returning to the Golden Triangle, but that is not to say that simply building something new and shiny will be an economic boon for Hull or for the community.

As I will discuss in a subsequent post, any redevelopment of the Leigh Mall, and other distressed properties, must be done in a sustainable manner that is borne of a collaboration between the local government, community stakeholders, and the landowner.