Inside mall scavenger Kohan’s shopping spree for declining shopping centers

Often the last owner a mall sees, Kohan Retail Investment Group's expansion draws scrutiny from locals

Burnsville Center in Minnesota (Connor Steinkamp)
Burnsville Center in Minnesota (Connor Steinkamp)

Located 15 miles south of downtown Minneapolis, Burnsville Center is your typical dying mall.

The majority of its storefronts are dark and its previous owner, CBL & Associates, filed for Chapter 11 bankruptcy in November 2020. 

So when New York-based Kohan Retail Investment Group landed half of the Burnsville Center property at auction for about $17 million — a fraction of the $64.2 million of outstanding debt on the property — the city had hope for a rejuvenation. 

That hope faded. 

“We’re not a developer,” Kohan founder Mike Kohan told the Burnsville City Council at the time. “We’re not trying to redevelop this property.”

But less than a year later, Kohan subdivided the 47-acre property, with a plan to sell off outparcels to pay back investors. Developers could potentially surround the mall with housing, office space or even a hotel.

Kohan has amassed a portfolio of 52 malls and two hotels, according to its website, and has picked up 15 other properties in the past year alone, according to its founder. Many of its properties are plagued by power outages, vacancies and overall neglect. Some are on the brink of foreclosure. 

Now the community of Burnsville is forced to face reality.

“Will the mall be the same as it once was in the ’80s and early ’90s? Our vision doesn’t show that,” said Regina Dean, assistant community development director for the city of Burnsville. “I guess time will tell.”

Delta Charter Township, Michigan, faces a similar situation. Kohan bought up the half-vacant Lansing Mall last year.

“They have not really established a vision for the mall, as of yet,” said Brian Reed, manager of the township. 

Malls have been in decline for years, with increased vacancies and falling foot traffic, which mirrors a broader shift in consumers’ habits. E-commerce’s share of total U.S. retail sales has jumped from 4 percent in 2010 to about 13 percent at the end of last year, with the pandemic acting as an accelerant, shutting down brick-and-mortar stores and forcing more shoppers to find refuge on the web. 

The vacancy rate for U.S. regional malls reached an all-time high of 11.4 percent in the first quarter of 2021, and three major shopping-center landlords — Washington Prime Group, CBL & Associates and Pennsylvania Real Estate Investment Trust — have been pushed into Chapter 11 bankruptcy during the pandemic.

That doesn’t seem to stop Kohan. The mall investor has spent the past two years scooping up properties across the country, often for fractions of their previous purchase prices. The Montgomery Mall in the Philadelphia suburbs, which in 2014 was valued at $195 million, was picked up out of foreclosure by Kohan last year for $55 million. The mall was previously owned by Simon Property Group. Last year, Kohan also paid just $33.25 million for the Triangle Town Center in Raleigh, North Carolina, down from the $174 million the property fetched in 2016.

“In general, nobody wants these poor little pieces of the property these guys are buying,” retail consultant Jan Kniffen said.

Often, Kohan is the last owner a mall sees.  

“I often compare it to the role of a junkyard in the automobile’s life,” said Nick Egelanian, president of the retail real estate consulting firm SiteWorks. “The glamorous part of the automobile’s life is when you buy at a new car dealership. But eventually it gets sold at a used car dealership. And then somewhere later in its life, it gets sold for its parts.”

Mike Kohan didn’t quite refute that comparison. 

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“I agree with that to some extent, but we do also have stabilized malls,” he said. “It’s definitely a mixed bag. I’m not trying to be a liquidator. I’m trying to come in and try to revitalize this mall the best possible way. Sometimes it’s beyond fixing.”

In the weeds

As the lawn at the Esplanade Mall went wild, the mayor stepped in. 

“Unkempt property is going to draw rodents and things that are worse, and we don’t need that,” Ben Zahn, the mayor of Kenner, Louisiana, told local news at the time. “If the mall can’t take care of themselves, we have to step in and take care of it for them.”

The city hired a landscaping company to manicure the premises. Eventually, it wasn’t just grass that was the problem. 

The property was put up for auction in a sheriff’s sale after Kohan failed to pay more than $300,000 in taxes in 2019. There were no bids, so the tax sale title was transferred to the local parish government. Kohan still operates the mall and has two more years to pay taxes and other penalties to reclaim the property. In the meantime, the city will continue maintaining the greenery.

It’s not the first time Kohan has run into local trouble with its properties.

The city of Vero Beach, Florida, threatened to shut off power at the Indian River Mall in 2017 after Kohan allegedly failed to pay its electric bills for three months.. 

Kohan failed to avoid a similar situation at the Rotterdam Square Mall in New York, which suddenly went dark in 2015 after $300,000 was owed on an electric meter Kohan said it wasn’t aware existed. In Lanesborough, Massachusetts, the Berkshire Mall was temporarily closed at least four times in 2018 and 2019 after losing power. Mike Kohan blamed “an issue with the electric meter.” 

Last month, Kohan’s Great Northern Mall outside of Syracuse, New York, was closed for a week after its pipes froze. Michelle Gregory, who owns a gymnastics center in the mall, told that the mall’s heat wasn’t working and its parking lots had not been plowed.

“It’s just one more problem we have with the mall’s owner,’’ she told the publication.

In 2013, after Kohan failed to repair a crumbling roof, exposed electrical wiring and a dismantled fire sprinkler system, officials in Matteson, Illinois, called the Lincoln Mall a “public danger” and ordered it closed. Kohan had bought the property out of foreclosure a year earlier for $150,000 with the understanding that it would assume responsibility for $9 million in fines and unpaid taxes accumulated by its previous owners. The mall was demolished in 2017 after sitting abandoned for years. 

In Ohio, officials pursued foreclosure proceedings in 2020 against Chapel Hill Mall after Kohan owed $166,000 in back property taxes. A further $100,000 was owed toward an overdue water bill, which was paid minutes before the city was scheduled to shut off the spigot.

Kohan has a habit of paying off its bills at the last minute. At the Washington Square Mall in Indianapolis, Kohan paid $1.1 million in 2018 to avoid a planned tax auction. And at Lycoming Mall in Pennsdale, Pennsylvania, Kohan paid $58,900 in 2019 to settle delinquent water and sewer bills and stop an auction.

“We are not 100 percent successful. Nobody could be,” Mike Kohan said, although he declined to comment on any individual properties. “None of these REITs and mall owners were close to even being 100 percent successful in their assets. There were assets that became distressed and, unfortunately, it gets to the point that you have to make some hard decisions.”

Of the 1,500 enclosed malls built across the U.S. since 1956, Ellen Dunham-Jones, an urbanist and professor at Georgia Tech, estimates that 500 have closed or been repurposed. A 2020 report by Coresight Research estimates that 25 percent of America’s roughly 1,000 remaining malls will close by 2025. 

These closures are often slow deaths, as stores vacate malls one by one and customers stop visiting. Owners like Kohan play a vital role in the decomposition process.

“If you own malls, and you’re like, ‘Look, no amount of money I can invest is going to get an economic return. Let me just operate these things until they die.’ That’s a very viable option,” said Alexander Goldfarb, an analyst at Piper Sandler, speaking generally and not about the Kohan portfolio. 

“This is a for-profit business,” he added.