Ever since its slow death finally came in 2005 with the exodus of Dillard's, Lexington Mall has sat. And sat. And sat.
It has become something of a riddle. Area developers look at the nearly vacant, 30-acre site and salivate at the location, an easily accessible corner of Lexington's busy Richmond and New Circle roads.
But besides the Applebee's and Perkins restaurants, nothing but the empty former mall sits on the land owned by Saul Centers of Bethesda, Md.
The company has been demonized by some who loathe the out-of-town owners who promised but failed to invest in remodeling the mall during its final decade, sued tenants who fled and became entangled in a long court fight with The Home Depot, which bought and developed adjacent property.
"Saul is the epitome of the bad out-of-town developer who just doesn't care," said Mike Scanlon, chief executive of Thomas & King, the restaurant company that leases land from Saul for its Applebee's restaurant. "There are great out-of-town developers in Lexington who do care. Saul's just not one of them."
The city government has maintained contact with the developer and has been told Saul is looking perhaps to add some restaurants near the Richmond Road edge of the property.
Vice Mayor Jim Gray also plans to push for the city to hire a retail consultant to craft a strategy to deal with that property and others around Lexington.
Multiple phone messages left for three Saul employees went unreturned. The leasing agent for the property hung up when a Herald-Leader reporter identified himself, and he then failed to return follow-up calls.
Years of promises
Saul has owned the property since 1974, the year before the mall opened, according to records on its Web site.
The mall thrived for decades with high occupancy rates. As the only shopping mall on the Richmond Road corridor, it competed well with Lexington's other two malls, Fayette and Turfland.
But the mall began to lose ground in the 1990s with Fayette's expansion. At the time, Saul's executives and managers promised changes.
"There are plans to do some major stuff," Chris Netter, vice president of leasing and development, told the Herald-Leader in 1990.
Three years later, the leasing agent said the mall would be remodeled. And as the years passed, more remodeling talk was heard and a second floor was discussed.
The changes never came, but lawsuits did. In 1997, Saul sued The Home Depot, which built a freestanding store on neighboring property. Saul said the home-improvement retailer violated a 1969 agreement between the owners of the two pieces of property that specified the land should be developed as one "mall-type shopping center."
By 2005, the mall was empty, as retailers headed to Hamburg and elsewhere. Saul sued several, including at least five in 2001, saying they violated their leases.
Throughout the years, the company has stayed quiet, rarely speaking with the media, and it has gained a reputation of being tough to deal with even for its tenants.
"I've been dealing with Saul for 10 years, and I've never dealt with a more difficult company," Scanlon said. "Unlike other developers in Lexington, these guys don't have a heart for the city they're in."
Since the fourth quarter of 2007, Saul officials have told investors in materials available on the company's Web site, www.saulcenters.com, that it has "prepared conceptual designs for a shopping center development and is marketing the site to prospective retailers."
Joe Kelly, senior adviser for management to Lexington Mayor Jim Newberry, said he has kept in touch with Netter, the Saul executive, generally every six to eight weeks since January 2007.
Saul has told the city it is formulating redevelopment plans and intends to reconfigure the pond in front of the Richmond Road entrance as part of that. It is in need of a federal permit, and the city has signed off on the application as required.
The city had initially withheld support, according to documents, because officials were concerned that Saul would immediately fill the pond. The company said that's not its intention and it would not seek any permits related to that until a development plan is filed.
Kelly said he thinks Saul's plan might involve adding retail, including restaurants to the Richmond Road portion of the property.
"They have made, I believe, good-faith efforts to try to secure some new clients for the property," Kelly said. "They continue to work on that, but as it is everywhere, retailers are not at the moment in the expansion mode."
Kelly said Saul executives appear open to using the space for a mixed-use development, too, instead of just retail.
Gray said his support for hiring a consultant to craft a retail strategy would supplement Kelly's work with the developer.
"What Joe Kelly's been doing is good," Gray said. "It's showing that the administration cares, that the city cares and most private businesses respond to public and political pressure."
He said the push to hire the consultant will come later this month at a meeting of the council's economic development task force.
"The more people you have with professional experience sitting around a table trying to address the problem, the higher the chance of success," Gray said.
A great location
Just what might work on the site is now in question, given Saul's delay in redeveloping.
Brian Wood, who revitalized the Eastland Shopping Center on Winchester Road after his company, BC Wood Properties, bought it in 2001, said tenants that might have gone to a redeveloped Lexington Mall already have positioned themselves elsewhere.
"A lot of tenants don't need two or three stores in Lexington," he said.
Phil Holoubek, who oversaw the Main & Rose and Nunn Building Lofts developments downtown, said the demographics around Lexington Mall might be flummoxing some potential tenants, too.
He said there are low-income, middle-income and high-income residents in the surrounding neighborhoods, and "an out-of-town retailer may not understand the demographics that are being shown as well as someone locally who can really explain it."
"It's kind of a unique site where you need local knowledge to explain it," he said.
But it is a great location for those new to the market or for smaller retailers or restaurants, some say.
The Lexington Mall property has been home to a strong Central Bank branch for years, said Steve Kelly, executive vice president for marketing and sales for the bank.
The branch was once inside the mall but moved out front to include a drive-through. The bank sits on property that was owned by a different company, and it bought the land from that owner two years ago.
"We would love to see the mall redeveloped and thrive again," Kelly said. "I can only assume they're just waiting for the right opportunity."
Ed Duncan, manager at Perkins restaurant, said the store is meeting its sales goals compared to last year but that it does suffer from being next to "a terrible eyesore."
"We put coupons out last year, and people didn't even know we were here," he said. "A lady called me this June and said she was so glad we had come back to Lexington and the Richmond Road area.
"I said, 'Honey, we never left.' That's what mainly hurts us."
Why nothing's happened
Some speculate the vacant mall might be an effective tax write-off for Saul, which operates more than 50 shopping centers and office properties, the bulk of them around Washington, D.C. Those around Washington provide about 80 percent of the firm's operating income.
Others doubt it.
"Tax losses being an advantage to companies or individuals is a myth in almost all cases," said Thomas Pope, an accounting professor at the University of Kentucky's Gatton College of Business and Economics who teaches a taxation class.
He and David Hulse, a fellow accounting professor who also teaches taxation, said a loss for tax purposes might save companies 30 percent to 40 percent, depending on their marginal tax rate. But actively renting generates a return of which 60 percent to 70 percent is left on an after-tax basis, they said.
And the property costs Saul tens of thousands of dollars annually.
Fayette Property Valuation Administrator David O'Neill said the taxes on Saul's property are about $86,000 annually. The property is assessed at $8 million, he said, down from its peak of about $18 million in 1998.
Also, new storm water fees beginning in January will cost the company more than $21,000 annually, said Mark York, spokesman for the city's Division of Environmental Policy.
But with its strong portfolio of shopping centers, the company "has the luxury of being able to sit there on that property," said Jim Hughes, chief executive of Bellerive Development Co., which developed Brannon Crossing in Jessamine County. "As large as they are, they could achieve financing (for a redevelopment), but it's got to be a slam-dunk for them to go forward."
Scanlon suggested change might only come if the community begins pressuring Saul.
"If it became a community issue like CentrePointe did, then maybe more could happen," he said. "But it never got fashioned one because it never got an advocate."