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Board of Review hears property tax appeal of 'dead' Eastland Mall

Eastland Mall
Staff
/
WGLT file
Attorneys for the Eastland Mall owner are asking for a 40% reduction in the property's assessed value.

A dispute over the property tax value of Eastland Mall in Bloomington suggests a school district and local governments are frustrated with inaction by mall owners and with its ongoing decline.

That came through in arguments made before the McLean County Board of Review in an appeal of the 36-acre mall's assessed value.

Attorneys for the mall owner are asking for a 40% reduction in the property's assessed value. Thomas Sweeney is a lawyer for Chattanooga, Tennessee-based Eastland Mall LLC. He said in the last three years, net operating income from the mall dropped by half — to $1.9 million per year.

The county estimate of the market value of the mall is $26.2 million. The owners said that should be $15.6 million. In contrast, Mike Ireland of the assessor's office said the mall sold for $73 million back in 2005.

Sweeney said vacancy rates have continued to climb at the mall that was 58% vacant in October of this year.

"This is a dead mall. It has four anchor tenants of which no one is occupied because of their size and configuration. Two store anchor tenants are not in real demand," said Sweeney.

John Pratt, the attorney for Bloomington District 87 schools, said Eastland should have opportunities to do better because the location is great.

"Perhaps the most visible intersection in McLean County at the corner of Route 9 and Veterans Parkway, a block away from State Farm corporate headquarters," said Pratt.

The mall claimed the shift to online retail purchases has reduced its viability. Sweeney said Eastland now has only one anchor tenant and, by definition, can no longer be considered a regional mall.

"They put money into it to try and maintain it, but trying to draw tenants into a mall that has no anchor tenants is quite difficult," he said.

The last time the mall was before the Board of Review was in 2019.In 2020, a deal was struckon an assessment that also resulted in Eastland ending its case before the state Property Tax Appeals Board. Pratt said assessments should be about fair market value.

"When the anchors left, we all made concessions. But that has now been seven years ago. And the system is not built so that the taxpayer can take advantage of not doing anything on this property. That's not the way the system works," said Pratt.

Since the last major assessment scuffle, there actually has been some redevelopment of anchor stores, though the assessor's office acknowledged the vacancy rate has gone up.

Pratt said the Supreme Court has held that it doesn't really matter how the property owner is using the property, it matters whether it is being used for its best use, and what the fair market value is. Pratt suggested the owners could be doing more.

"Is it fair to the other taxpayers to give them a reduction based on their inability to use this property to its best use for year after year?" asked Pratt.

District 87 and Heartland Community College acknowledged some reduction in the assessment is in order. They offered to chop it by 10%, but that was rejected over the weekend. Sweeney said the offer "ignores reality."

He called a 10% reduction "a nice gesture, but it doesn't help my client at all."

Sweeney said you can't put money into a dead mall if no one is going to visit that mall. He said venue is losing tenants because they didn't have the foot traffic even when the anchors were there.

Pratt responded with a different view.

"The reality is that everything around here has increased by more than 10%. Everything on the north, east, west, south of this location, all along Veterans Parkway. The reality is everything has increased by way more than 10%," said Pratt.

At that intersection, the former Kmart strip was redeveloped. An old Holiday Inn was torn down and replaced with a restaurant and car dealership. A one-time Toys R Us store was revived, and a restaurant has gone in near it. And there's another new restaurant on the mall property itself, Outback Steak House.

Mike Ireland of the assessor's office questioned the reasoning of mall owners in basing their claim mainly on net operating income.

"The assumption is that because something is vacant it has no value. If it doesn't have any income, it doesn't have any value. That's not necessarily true. And you have to take that into consideration. If you can't rent it, then why would you not tear it down, so you don't have to pay property taxes on that portion? Why would you not get rid of it," said Ireland.

Ireland said if there were no buildings on the mall site and it was available to develop it would be much more valuable that it is right now.

"Some of the improvements are actually penalizing the value of the land because they are not at the highest and best use," said Ireland, adding the mall land is currently valued at about $6 a square foot. The former Holiday Inn catty-corner to Eastland — across Route 9 that was torn down and the space turned into a car dealership and Pizza Ranch — sold at about $20 a square foot, he said.

He said the Champaign mall is a little newer than Eastland, built in 1967, but not by much.

"And I look around and go, Wow! Why is this so wonderful? Why is this so well kept? Why is it updated? What you are getting at is management issues," said Ireland.

The appraisal and assessment process is not supposed to benefit or penalize good or bad management, he said, noting the former College Hills Mall had the same sort of problems Eastland has now. But it worked through them, and is doing great as The Shoppes at College Hills.

Sweeney said College Hills had fewer anchor tenants leave than Eastland, and so is a much different case.

The Board of Review will finish its appeals hearings on Dec. 29. It could be mid-January before a decision is announced.

WGLT Senior Reporter Charlie Schlenker has spent more than three award-winning decades in radio. He lives in Normal with his family.
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