— Despite a plea from Rockstep Willmar LLC, owner of
the Kandiyohi County Board of Appeals and Equalization on June 18 upheld the County Assessor’s Office valuation of the five mall parcels, saying property sales around the mall prove the parcels’ valuations are correct.
“The land is worth what it is worth,” said Jennifer Halverson, commercial appraiser with the Assessor’s Office.
The 2024 values of the five parcels, which include the old Herberger’s site, the remainder of the mall and the Verizon building, two empty lots on the mall’s west side and the strip mall on the south side, were set at $8,032,800. It was a slight increase from the 2023 valuation of $7,859,300.
The mall address is 1605 S. First St. The parcels are located roughly between First Street and Fifth Street Southeast, north of 19th Avenue.
“We made no change from last year’s assessment to this year’s assessment barring some new construction for the new golf simulator property,” Halverson said.
Rockstep’s appeal was for the county to reduce the property values to $5,746,340, which was higher than the $4,344,108 it actually wanted based on using a net operating income approach to value the property.
“We wanted to meet somewhere in the middle,” said Tommy Stewart, Rockstep COO, who attended the meeting remotely from Texas.
Macy Moore / West Central Tribune
Stewart said paying taxes on the $8 million value would be a challenge for the property.
“As you know, the property is stressed,” Stewart said.
Rockstep purchased the mall property
, then known as Kandi Mall, in October 2015. At the time the property was valued at $9.2 million, but Rockstep paid $14.1 million. The next year the value of the property rose to $11.4 million.
Stewart said that when Rockstep purchased the mall, it was not a stressed property. However, the mall soon fell on tough times with its anchor stores and many smaller retailers closing.
The Kmart had closed in 2012, before Rockstep’s purchase, but Herberger’s closed its doors in 2018, followed by the Sears Hometown store in 2019 and JCPenney in 2020. Other closed stores over the last several years have included Rue 21, GNC, Book World and Hallmark.
“When the anchors leave, typically a lot of the interior mall tenants leave too,” Stewart said. “COVID compounded it.”
The mall owner has appealed the property values several times since buying the mall,
.
A
settlement between Rockstep and the county
was approved in 2020, which included terminating a tax abatement agreement approved in 2016 and reducing the property value of the mall over three years, back to its 2016 value.
That agreement, which precluded Rockstep from appealing its property values for three years, expired in 2023.
Rockstep does have an agreement with a buyer to purchase the Herberger’s portion of the mall, but the sale price of $400,000 is significantly less than the appraised value of $759,500.
According to information presented at the meeting, Rockstep is also trying to sell the strip mall, which houses Lifetime Fitness and Golden Palace, and has three offers, with the highest at $600,000. That, too, is far below the appraised value of $1,172,700.
“Both of those buildings need a lot of work; exterior, roofing, parking lot,” Stewart said. “Roofing costs have gone up dramatically the last three years.”
Halverson said the county has taken into account the mall’s physical condition in the valuation. However, the mall parcels, which total about 44 acres, are located on prime commercial real estate in Willmar, along First Street South and 19th Avenue. Properties surrounding the mall, some of which were owned by Rockstep, have sold at high values.
For example, the parcel that now holds the Auto Zone business was sold in 2017 for $425,000 or $15.18 per square foot, according to information presented at the meeting. The now empty lot that once housed Pizza Hut, sold in 2022 for $737,500, or $19.23 per square foot. It is now listed for sale at $850,000.
Other sales figures presented included that the Aspen Dental building was sold in 2020 for $2,270,000, and TJ Maxx purchased the former office supply store property at the corner of First Street and 19th Avenue for $1,690,000 in 2022.
Aldi purchased its site in 2014 for $819,322 and Tidal Wave Car Wash bought its land in 2022 for $858,500.
Macy Moore / West Central Tribune
Halverson said that if the sales of the Herberger and strip mall go through, and are for lower values, it could have some impact on overall property values in the area. However, she would have to see more properties going for lower values before believing it is a trend.
“Two sales don’t make a market,” Halverson said.
The Board of Appeals and Equalization, which is made up of the county commissioners, did sympathize with Rockstep, but in the end, unanimously upheld the assessor’s office valuation. Rockstep can still appeal the decision by taking it to the Minnesota Tax Court.
“I recognize this as a tough property. I know there is some good use for it out there somewhere,” said Commissioner Steve Gardner. “However, staff have shown the valuations are right and proper and should be upheld.”
