Vexing. The word just repeats over and over like a looped recording throughout the continuing saga of Lexington Mall, sole non-performer among the scores of highly successful retail properties owned by Saul Centers of Bethesda, Maryland.
Dozens of cities across the country - - inner suburbs, in particular - - have dead shopping malls on their hands and few have figured out how to effectively repurpose them. Fewer still, however, present their host cities with the peculiar interrelated legal, developmental and market quagmire that is Lexington Mall.
To explore why the vacant and shuttered Richmond Road structure sits forlorn and unsightly years after the last tenant switched off the lights - - and how its predicament is both similar and very different from that of that other failed urban center, Turfland Mall - - is to discover the uniquely vexing challenges encountered by its owners in their repeated attempts to redevelop the space in the image of Thruway Shopping Center, the company's successful clustering of upscale brands in Winston-Salem, North Carolina.
It's not as though Saul Centers lacks the wherewithal to make spectacular things happen. Among its 51 properties in nine states and the District of Columbia is the recently approved Clarendon Center, a LEED Certified $200 million mixed-use project in Arlington County, Virginia that exudes the very "mixed-use" motif of residential, retail, office and green spaces envisioned for the Lexington Mall site by most of the randomly selected Lexington community leaders surveyed for this article.
What many may not realize, however, is that the company only recently emerged from a protracted legal battle with its neighbor that has left some very desirable potential tenants in its wake.
"While none of us is pleased with the lack of progress to this point, my sense is that it's not for a lack of effort," the mayor's senior advisor, Joe Kelly, said of Saul. "They have worked very hard to put together a package where people could be successful as opposed to throwing together a deal just to get a deal done which, when there is as much attention to a piece of property as has been given to the Lexington Mall property, there sometimes is an inclination to do."
Two worlds collide
The nightmarish difficulties associated with redeveloping Lexington Mall can be traced through a protracted legal dispute between Saul Centers and the adjacent Home Depot all the way back to an agreement between the original developer and future tenants.
In 1969, developer John W. Waites Associates executed a restrictive covenant mandating that any future tenants would cooperate in constructing "one mall-type shopping center, compatibly designed" with entrances to and from one anothers' properties to be shared by all patrons. The idea was to establish "destination" stores in the west and east ends of a "dumbbell-shaped" structure which, with their combined advertising muscle, would attract shoppers who would then stroll from one end to the other, patronizing the smaller shops located between the anchors. The mall was built by Saul Centers on two pieces of adjoining properties including Saul's portion, anchored by McAlpin's on the west end (later Dillard's) and a grocery, County Market, located in the separately-owned east side.
The grocery eventually left and its 100,000+ square foot space was divided and sub-leased to three separate parties including a grocer, a lumber company and a furniture store which later left and sub-leased, creating yet another layer of "future tenants" referred to in the covenant, each conferred with a "say" in any renovations or changes to the mall. The result was a dissonant cacophony of competing interests and opinions about how or whether Saul should proceed.
One of those tenants was Home Depot, which made it known to Saul that it intended to buy the adjacent 15 acre parcel, openly defy the 1969 covenant, tear down its existing store on the southeast end of the mall and construct the free-standing store.
Saul, concerned that this disconnection would destroy critical to-and-fro pedestrian traffic in the mall, tried to dissuade Home Depot from going forward with its plan but was rebuffed by the home improvement retail giant.
Saul filed suit in 1997 seeking a permanent injunction against Home Depot. Two months later Home Depot took title to the adjacent property, and, green lighted by a city planning commission aware of the 1969 agreement, demolished the existing building. Construction on the new free-standing store got underway despite Saul's warning that under the terms of the 1969 agreement, any store built on the smaller tract had to be attached to the mall.
As the case rolled through one delay after another, Hamburg Pavillion arose on the eastern edge of Lexington, siphoning traffic that might have flowed to Lexington Mall.
Seven years after Saul launched its suit, the trial court ordered Home Depot to remove its new building and conform with the terms of the restrictive covenant.
With millions invested in the property and new store, Home Depot took the matter to the Kentucky Court of Appeals and was sharply rebuked, the court finding that the retail giant had violated the restrictive covenant despite the objections of Saul Centers, a party to that covenant. The appeals court told Home Depot to tear down the building.
Home Depot then turned to the state Supreme Court, which ruled in sympathy with Saul's argument that Home Depot wanted the court to "abandon decades of established Kentucky precedent and put at risk untold numbers of restrictive covenants relied upon by thousands of Kentucky businesses."
In the fall of 2005, Saul and Home Depot executed a new land use agreement granting each the flexibility to improve its property. Upscale food retailer Fresh Market had signed a lease to locate in the mall, raising hopes that this would attract a compatible clustering of other upscale retailers. But now, Saul found itself in the ironic and uncomfortable position of adhering to the terms of the restrictive covenant and asking Home Depot, its adversary in court, to waive terms that prohibited the location of a food store within the mall. Home Depot refused. When the former Slone's market in Landsdowne became available, Fresh Market, weary of the wait, abandoned its lease with the mall and settled into the Tates Creek Road location.
Saul allowed the failing Dillard's to terminate its lease and the mall's remaining tenant closed its doors.
What now?
Saul Centers, a conservative organization with solid earnings and reputation, is in an unaccustomed struggle to find a solution for a mall property that is joined at the hip with a business that thrives on do-it-yourself home-improvers, customers largely "on a mission" for mulch bags as opposed to handbags and unlikely to make a side trip to browse upscale retail.
Professionals in the mall development business say the aesthetics of the home improvement retailer are incompatible with those of an upscale mixed-use retail, residential and office development. It doesn't help matters that the economy is in such turmoil; that Fayette County already has more than enough available office and residential space; or that two mega-malls, Fayette and Hamburg, now draw away traffic with two more coming on line in Scott and Madison counties.
"I'm confronted with three options," said Mayor Newberry. "The first is to initiate some kind of condemnation action with a view towards Urban-County government taking the property for some purpose. That option of course generates the question, how are we going to pay for it? And I really don't have a good answer for that question right now. That is a very expensive piece of property. The second option is for us to condemn it and then turn around and sell it to some other private interest. I have some philosophical problems with any governmental entity taking private property just so it can turn around and make it available to another private interest. So that second option's not appealing. That leads me to the third option, which is to continue to try to work as diligently as we possibly can with Saul to encourage them to find a feasible alternative use for it."
The city may soon have at its disposal a new form of leverage: raising revenues to pay for the repair of the city's storm water systems by imposing a new "impermeable surfaces fee" on properties with hard surfaces such as roofs and parking lots that contribute to excessive runoff. The Urban County Council is expected to be asked to consider such a fee next year, If approved, it would create for Saul Centers a significant new ongoing cost of maintaining the status quo on Richmond Road.
"There has to be a solution to this," said Cheryl Feigel, elected on Nov. 4 to the Urban County council representing the city's 5th District, which encompasses Lexington Mall. "It just cannot continue to go on like it is. I will certainly investigate it and see what I can do to bring about some additional discussion, but I feel there has to be some solution, somewhere."