A trio of companies that partnered to buy the troubled Sunrise Mall paid one-fifth of the price the mall went for in 2005.
Sunrise Mall Holdings LLC, a joint venture led by Manhattan-based real estate investment trust Urban Edge Properties, paid $29.7 million to buy the Massapequa mall from Unibail-Rodamco-Westfield, a Paris-based company, Urban Edge said in a statement Monday.
The sales price is a steep decline from the $143 million the property sold for in 2005.
The deal, which closed Dec. 31, also includes up to $6 million of "additional contingent consideration," which means that if certain objectives are achieved, the buyer pays more money to the seller, an Urban Edge spokeswoman said.
Sunrise Mall is 1.2 million square feet on 77 acres.
Its anchor tenants include Macy’s, Sears, Dick’s Sporting Goods and Dave & Buster’s. Many of the other stores are small, independent retailers.
A redevelopment is planned, but neither URW nor Urban Edge would disclose specifics.
"Sunrise Mall is a unique asset with a prime location in a dense, attractive region along the southern shore of Long Island," Jeff Olson, chief executive officer of Urban Edge, said in the statement. "This acquisition provides a terrific opportunity for Urban Edge to leverage our redevelopment expertise in repurposing underutilized land and creating value."
Urban Edge’s 79 properties include several shopping centers on Long Island, such as Huntington Commons, formerly called Big H Shopping Center, on New York Avenue; Burnside Commons on Burnside Avenue in Inwood; and Meadowbrook Commons on West Sunrise Highway in Freeport.
URW, which has U.S. offices in Los Angeles, owns 88 retail properties, including Westfield South Shore in Bay Shore.
Urban Edge’s partners in Sunrise Mall Holdings are Sagamore Hill Partners, a Manhattan-based real estate investment firm affiliated with Jericho-based Ripco Real Estate, and J.G. Petrucci Co. Inc., an Asbury, New Jersey-based company that is an "established developer of industrial assets."
Urban Edge is the managing member of the partnership, with an 82.5% interest, the company said.
Sagamore and J.G. Petrucci did not respond to requests for comment.
A message in the price
The stark difference in the purchase prices of Sunrise Mall in 2020 and 2005 is a strong indication that significant change awaits the property, according to a local real estate expert.
"They’re basically buying the land, minus the cost to get rid of the building. It’s a land deal. A price like that is basically saying that the existing structure is worthless," said Kenneth R. Schuckman, president of Schuckman Realty, a Rockville Centre-based firm. Schuckman was not involved in the Sunrise Mall deal.
Decisions about future uses of Sunrise Mall should factor in input from local stakeholders, including residents and the school district, said Oyster Bay Supervisor Joseph S. Saladino, who was among the town officials who met via Zoom with Urban Edge representatives in December to discuss the mall.
"We would welcome job growth. We would welcome the site generating greater revenues for the school district, so the cost of education is less burdensome on property taxpayers," Saladino said Monday.
Malls nationwide have been contending with rising vacancy rates for years as they have lost tenants, particularly large department stores, that struggled to compete with online and big-box retailers.
Their problems were exacerbated in 2020 after the COVID-19 pandemic led to several months of state-mandated mall closings to help stop the spread of the virus.
But Sunrise Mall has performed well below average for years.
The mall’s vacancy rate was 18.7% in the fourth quarter of 2020, which was actually an improvement from the same period in 2019, when the rate was 20.9%, according to data from the CoStar Group, a Washington, D.C.-based commercial real estate information provider.
Urban Edge, however, says Sunrise Mall's current vacancy rate is higher, 35%.
By comparison, the average mall vacancy rate in the fourth quarter of 2020 was 5.8% on Long Island, 4.2% in New York State and 6.4% in the United States, according to CoStar.
One of the issues specific to Sunrise Mall is its proximity to competing big-box stores in shopping centers along Sunrise Highway and other nearby places, Schuckman said.
"You can drive for 10 minutes and get to any type of retail that you need," he said.
But since the pandemic is accelerating the problems that malls were already having, Sunrise Mall won’t be the only large retail property on Long Island that will be "reconfigured" sooner than expected, he said.
*Built in 1973
*1.2 million square feet
*On 77 acres
*Current vacancy rate: 35%