Norfolk City Council votes to purchase MacArthur Center

On Wednesday evening during a special meeting, Norfolk City Council members approved plans for the city to purchase the struggling MacArthur Center mall downtown for up to $18 million. 

The 23-acre MacArthur Center is owned by Wells Fargo & Co., which holds the mall following a loan default by the mall’s previous owner, Connecticut-based Starwood Property Trust. 

Council took two actions Wednesday: In the first vote, councilors approved up to $18 million to buy the mall, which will come from three sources: $12 million from the city’s unassigned general fund balance reserve, up to $3 million from its capital improvement fund and up to $3 million from the land acquisition fund. According to the purchase agreement, the price of the mall is $11.05 million, with the rest going to consulting, legal and other fees. Norfolk Mayor Kenneth Cooper Alexander said he expects the deal to close in 30 to 45 days.

All council members, except Tommy Smigiel Jr. of Ward 5, voted in favor of the $18 million allocation. Smigiel objected because the downtown area receives more money and faster action than projects in other parts of Norfolk, he said.  To his colleagues on council, Smigiel added, “I respect you guys, but I’m going to keep reminding us of that equity issue. It is an equity issue when it comes to voting on things like this, so we need to do everybody’s projects throughout the city when they come up.”

In the second vote, council members unanimously approved ratifying a consulting agreement between the city and GEI Advisors Inc., a consulting engineering and environmental firm.

The mall was listed for sale in January by JLL, though no price was listed at the time. The mall includes 914,751 square feet of leasable area. Current mall anchors are Dillard’s Inc., with 253,616 square feet, and Regal Cinemas, with 80,210 square feet. Another 160,000-square-foot anchor spot is vacant. The mall’s three anchor spaces account for 493,826 square feet, or about 54% of the total space at the mall, which also has a multistory parking garage with about 4,000 spaces. But in recent years, the mall has lost major anchors such as Nordstrom, in April 2019, the Apple Store, in 2021, and, more recently, restaurants Texas de Brazil and California Pizza Kitchen.

The city will now own everything at MacArthur Center — including the mall property, parking garages and the land it all sits on — except for the Dillard’s building, which is owned by the retailer.

Several city residents spoke during a public comment period about the two ordinances, with some saying the city was moving too quickly and questioning “the rush,” while others supported the move. 

On Tuesday, Norfolk Mayor Kenneth Cooper Alexander told Virginia Business that buying the mall would enable the city to “play an active and strategic role.” He noted that MacArthur Center would continue operating as a mall and that the city would have discussions with the mall’s tenants. He suggested that the transition would be “seamless.”

The most recent assessment of the mall was about $25 million — about $20.7 million in land value and $4.2 million in improvement value. That’s down significantly from its July 2022 assessment, when it was valued at $51.8 million, including $24.8 million for the land, city records show.

The mall is now 62% vacant, according to JLL. Starwood Property Trust bought the mall in 2014 for $265.5 million from Michigan-based Taubman Centers Inc., as part of the $1.4 billion purchase of seven shopping malls. However, Starwood defaulted on a $750 million loan in 2019, and MacArthur Center is now owned by Wells Fargo and managed by Syracuse, New York-based Spinoso Real Estate Group. The city owns the land the mall sits on at 300 Monticello Ave. and has a leasehold interest.