Ross is holding up demolition of Military Circle Mall, driving up costs for Norfolk EDA

NORFOLK, Va. (WAVY) — One of Military Circle Mall’s last remaining tenants is holding up the demolition of the sprawling desolate shopping center, according to the city’s economic development director.

Ross Dress For Less, the California-based discount department store, has not signed off on a plan that would see a majority of the 935,000 square-foot property leveled.

Taking the building down to the ground would help the Norfolk Economic Development Authority (EDA), the owner of majority of the former mall, save money while the city figures out the future of the property.

Ross would still be able to make money, as the part of the building they operate out of would remain open and untouched.

One might think because Ross is a tenant of the EDA, the EDA would be calling the shots.

However, because of an age-old operating agreement governing the mall property, Ross as a tenant still holds the trump card until its lease is up.

The EDA first purchased the majority of the mall’s property for $13.4 million in 2020 , with the eventual plan for redevelopment.

At the time, the 50-year-old mall was operating at a yearly $400,000 deficit, but the EDA was able to break even as they no longer had to pay real estate taxes.

But by February of 2021, one of the malls last remaining anchors — Cinemark — abruptly left , as did $60,000 a month in revenue. Even though no decision on the sites future had been made, the EDA made the call to have the mall close by Feb. 2023 in order to try and prevent a $1.3M operating deficit.

The only businesses that remains in the main mall building after the closure are Ross and Sentara. The later of which is not an EDA tenant, as Sentara owns the former JCPenney box store .

Tami Simonds, with Divaris Property Management, who has managed the mall since 2020, told the EDA in March that the mall is now estimated to run $120,000 in the red each year.

Even with rent payments coming in from Ross, as well as several outparcel tenants, the EDA must pay monthly insurance, security, water and utility payments for the mostly abandoned property.

Jeffrey Brooke, chair of the EDA, wanted City Council to understand the pressure they are under.

“It’s costing us more money than we have,” Brooke said to City Council last week. “We had a settlement with the movie theaters that were a tenant. That put some money in our pockets, but that money is being depleted very rapidly.”

At this rate, the EDA will be out of money in about a year-and-a-half to run the site.

“We’ll be in a real pickle with how the mall gets run,” Brooke said.

Initially, it was expected that most of the building that was Military Circle Mall would be rubble by now.

In a release last spring, the EDA said demolition of certain mall out parcels would happen first. Then, the main mall building would begin falling later in 2023. The City of Norfolk set aside $10 million to cover the costs.

While the former homes of Piccadilly Cafeteria, The Palace Shops, China Garden and Swagath Plaza have all been leveled, Sean Washington, the city’s economic development director, said they are in a holding pattern until further notice.

“In terms of the operating agreement, we still need to get (Ross’) consent to be able to move forward with the demolition,” Washington said. “So we’re working through some of those times as we speak.”

The operating agreement is something the EDA inherited. The agreement, meant to protect the input of anchor stores in a retail center operation, requires the input of other property owners for redevelopment.

In this case, the agreement include Ross, which is considered a mini-anchor, Sentara, the Firestone Complete Auto Care and Hurricane Express Wash.

All but Ross has signed off on demolition plans.

“That’s their right,” Washington said. “They are a tenant there. They’ve been a tenant there since before we actually closed on the mall. And again, if I’m in their seat and I’m operating my business and I’m generating sales and generating revenue, which they’re doing successfully, I wouldn’t qualify sharing at all. That’s their right to do so.”

Still, it doesn’t mean Washington isn’t in negotiations with Ross to relocate before their lease is up in 2026.

“They’re definitely willing to have conversations with us, yes,” Washington said. “And we’ve been having some ongoing conversations for some time.”

Nobody from Ross was immediately available for comment on why they won’t let at least some of the demolition move forward.

In the meantime, another round of studies is due this fall to lay out the best use of the 70+-acre site.

Plans for an arena and new VA Medical Center all went the same place the old mall has gone: nowhere.

CORRECTION: The on-air version of this story incorrectly stated the term of Ross Dress For Less’s lease. WAVY-TV apologizes for the error.

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