Correction: A previous version of this article contained a quote with incorrect information about J.C. Penney’s financial standing. The company emerged from bankruptcy in late 2020.
A nearly 50-year anchor of West Des Moines' University Avenue shopping corridor is under foreclosure.
Last week, U.S. Bank filed the action in Polk County district court, alleging the owners of Valley West Mall have not made loan payments since May 6, 2021. The foreclosure petition claims Minneapolis-based Watson Centers owes the bank $3.5 million.
The bank has requested the court appoint a receiver to take control of the West Des Moines property and manage rent and loan payments, as well as order Valley West Mall to pay the remainder of its original loan, totaling at least $41.2 million, plus liquidation fees, legal expenses and interest.
Julie Burtnette and Laura Johnson, co-founders of the Des Moines Children's Museum, a tenant on the lower level of Valley West Mall, posted on the nonprofit's Facebook page that news of the foreclosure came as a surprise.
"We love serving the community and for the time being there will be no interruptions or changes to our services," the post said. "We will be gathering information and researching our options."
According to another Facebook post, Artfull, a studio space located on the upper level of Valley West, also plans to continue business as usual.
"As the past few years have taught all of us a lot can happen between when the news prints and the bank closes," the post said. "Nothing this big ever happens over night. We will gather the information we can and consider our future in the community."
The mall's struggles began years ago, and were compounded by the closure of the department store Younkers in 2018 followed by a building-wide closure in March 2020 when the pandemic reached Iowa.
Valley West Mall's fate isn't unique
Valley West isn't the first mall to face foreclosure and it likely won't be the last.
As shopping habits shift, consumers are relying more on e-commerce services versus traditional brick-and-mortar locations. By 2026, retail analysts predict thousands of stores will close across the country, according to reporting from Insider, affecting the viability of traditional shopping malls. An estimated one-quarter of American malls will close down in the next three-to-five years, according to a report from Coresight Research from 2020.
Some mall management groups are focused on trying to attract shoppers with non-traditional tenants like movie theaters, bowling alleys and bars and restaurants.
There are several questions that remain unknown: If the mall would close, when it would close and what would happen to customers' favorite retailers. Here's what we do know.
What Valley West's closure could mean for the City of West Des Moines
For now, Valley West remains open for business, anchored by department stores JCPenney and Von Maur, which plans to move to Jordan Creek Town Center this fall. Valley West Mall will likely be sold after the court enters a judgment unless Watson Centers seeks a two-month delay. Tenants would continue to pay rent, but to a court-appointed receiver while the foreclosure proceedings happen instead of Watson Centers.
But if the mall permanently closes, that wouldn't be too much of a hit to the city's budget, said Community and Economic Development Director Clyde Evans. There will be a revenue impact if the mall closes, but not to the extent that it would cause any layoffs or significant changes to the city's budget.
City officials see properties sold or assessed at different values all the time, he said.
Should Valley West sell, the new owners could change the property into something new.
"If it does change hands, we'll work with whomever has the property," he said.
Could the closure of the mall affect nearby development?
Since the mall opened in 1975, the property has had a major impact on the University Avenue business corridor.
Evans told the Des Moines Register last year when the city was campaigning for a $278 million redevelopment project, $262 million of which would be invested by Valley West Mall owners, that the mall's success will affect whether other development will thrive.
The city was ultimately not successful in its bid for $30 million in state assistance and the project — which included a mix of apartments, a hotel, an entertainment center and offices, as well as public gathering space and two ponds surrounded by walking paths — fell through.
"That site by itself could not survive in its present configuration and I think the owners of the mall realize that too," Evans said.
What happens if the Valley West Mall is sold?
A new owner will likely look to redevelop the site, Evans said, and the city would work with them.
Yet it's unlikely that the mall would be sold for its current assessed value of $32.9 million. Since 2017, the property value has decreased by nearly $10 million each year.
The same year Jordan Creek Town Center opened in 2004, the first year valuations are available on the Polk County Assessor's website, Valley West Mall was valued at $100.9 million.
Chief Deputy Assessor Bryon Tack said it's unusual for a property to lose so much value within five years. The decline most likely started before 2004, he said.
Most properties in Polk County, when comparing their values from 18 years ago, would have increased significantly, he said. Malls, however, have been struggling around the country.
"With these types of retail properties the value is driven by the leases and the income that the property can produce," Tack said. "As their vacancy continued to grow and their income decreased, that's what we were reacting to."
Hannah Rodriguez covers retail for the Register. Reach her at firstname.lastname@example.org or on Twitter @byherodriguez.
This article originally appeared on Des Moines Register: What Valley West Mall foreclosure means to West Des Moines