City News, ECONOMY

Salem Center mall sells to local owners

A trio of local investors have bought the downtown Salem Center mall with plans to revitalize the shopping center and recruit a mix of new local and national tenants.

Kelly McDonald, Patrick Carney and Mark Shipman closed on the 289,000-square-foot property last week under the name OGSC2, LLC. They paid an undisclosed sum, buying the property from Rialto Capital Management.

The mall has been in limbo since 2018, when the previous owner defaulted on a loan. As part of bankruptcy proceedings, the mall was sold for $27 million to the holding company, which has owned it since.

Stores inside have continued operating, but it’s been difficult to entice new tenants and there’s been no investment to remodel or make changes to the property.

“We have just been keeping the property maintained, clean and in process, waiting for an investor group to take over and now we have that,” said Rian Fechtel, general manager.

The new owners have experience in real estate development and investment in the region.

McDonald is a real estate developer who’s been involved in other local projects, including as an owner of the Granary District in McMinville, a redeveloped collection of breweries, wineries and other food, drink and retail near downtown. He lives outside Amity and grew up in Shedd, Oregon.

Carney is a real estate lender for Eugene firm Blue-inc Capital, according to their website. Shipman is a real estate and land use attorney at Salem firm Saalfeld Griggs PC.

McDonald said the group is excited to bring the mall under local ownership and recruit new tenants, both local and national, to fill current vacancies. The mall is in good shape, he said, and has open space they can work with.

“It’s going to give us an opportunity to bring new things to downtown,” he said.

Vacant storefronts at Salem Center mall in downtown Salem on Wednesday, March 6, 2024. (Rachel Alexander/Salem Reporter)

Downtown Salem has undergone significant growth over the past five years, adding hundreds of new apartments and major developments on formerly vacant lots. 

“It just reinforces that the future of downtown Salem is bright and people are willing to put their money where their mouths are,” said Jim Vu, president of the Salem Main Street Association, on the purchase.

McDonald said the group wants to make the mall part of downtown’s revitalization, conducting market research and discussing with city officials and others what downtown needs.

“We’re not buying this thing as a coupon clipper, investment firm portfolio,” he said. “We’re humble local guys that are going to be at the mall and working with the community.” 

It’s early in the process, he said, but options for vacancies could include a grocery store, local food and beverage options with openings to the street, and entertainment.

“Our focus is going to be on determining what fits best with the needs of the community, and downtown specifically, as it goes through this incredible transformation,” he said.

The purchase includes the north and south Salem Center buildings on either side of Northeast Center Street between Northeast Liberty and High streets.

Those buildings are home to retailers including Ross, American Eagle Outfitters and Made in Oregon.

The purchase doesn’t include anchor stores Kohl’s and Macy’s, which are separately owned. It also doesn’t include the former JC Penney store at 305 Liberty St. S.E., which has sat vacant since closing in 2020.

Portland developer Lindquist Development Company bought the Penney property in 2021 with plans to develop it into smaller retail spaces. That project has floundered, with no leasing activity as of 2023.

The mall was built in the late 1970s and has been a centerpiece of downtown retail since its opening in 1980.

It was originally anchored by four department stores, with sky bridges connecting the properties over downtown streets.

Nordstrom, one of the original anchors, closed in 2018. McDonald and Carney bought the property in 2019, teaming up with Portland firm Deacon Development. They hoped to develop the building into new retail space and had signed letters of intent from retailers.

But when the Covid pandemic hit, those tenants pulled out. Carney and McDonald sold their interest when Deacon pivoted to demolishing the building and turning it into apartments.

Now, the Rivenwood Apartments are nearing completion, bringing 157 new households to live next door to the mall.

The Rivenwood Apartments in downtown Salem near completion in December 2023. (Rachel Alexander/Salem Reporter)

Salem Center will remain managed by JLL, a global real estate and property firm, with Fechtel as general manager.

Fechtel said he’s always happy to hear from Salemites what they’d like to see at the mall. People can stop by the mall office during business hours, call at 503-399-9676 or reach out on social media.

The owners are working with Salem firm Studio 3 Architecture.

“We’re looking at the long term future of the mall and how it can be turned into an asset,” McDonald said. “That’s going to take some investment and it’s going to take some elbow grease.”

Correction: This article originally identified the ownership group as Salem residents. All three owners are Oregonians, but not all are in Salem. Salem Reporter apologizes for the error.

Contact reporter Rachel Alexander: [email protected] or 503-575-1241.

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Rachel Alexander is Salem Reporter’s managing editor. She joined Salem Reporter when it was founded in 2018 and covers city news, education, nonprofits and a little bit of everything else. She’s been a journalist in Oregon and Washington for a decade. Outside of work, she’s a skater and board member with Salem’s Cherry City Roller Derby and can often be found with her nose buried in a book.