Steve Lay has seen the blank stares when he assigns his real estate students at Collin College a paper on any local mall and includes Collin Creek as a possibility.

Even though the mall is just north of one of Plano’s busiest intersections, U.S. 75 and the President George Bush Turnpike, the students’ lack of recognition confirms Lay’s hunch.

“A generation of local residents hasn’t shopped at Collin Creek,” said Lay, general manager of Frisco’s Stonebriar Centre from 2000 to 2013 and, before that, at Mesquite’s Town East Mall. “People in my classes have no idea it exists, and they drive up and down 75.”

It takes a dying mall a long time to descend into the obscurity that now marks Collin Creek’s life cycle.

Collin Creek was built for all the reasons that regional malls were created in their heyday in the 1970s, ‘80s and ‘90s. In recent years, the 1.1 million-square-foot center has been hit with everything that can make a mall stumble, weaken and finally close.

The 2018 holiday shopping season was Collin Creek’s 38th and final Christmas.

Its new owner, Dallas-based Centurion American, plans to tear it down and turn the prime 100 acres into a $1 billion mixed-use development with townhomes, apartments, office, retail, restaurants and a park.

The mall is expected to close by the end of June, and “we hope to have shovels in the ground by July digging the new all-underground garage,” said Centurion American CEO Mehrdad Moayedi.

A couple dozen tenants remain, and Centurion is giving them time to make their exits. J.C. Penney will be the only store to stay open during construction.

Plano still must approve the plans, but city leaders are motivated to see the redevelopment. They've worked aggressively in recent years to turn the city's historic downtown that's directly across the highway from Collin Creek into a more densely populated and thriving entertainment and government district.

How Collin Creek got to this point says as much about its ownership history as it does shoppers’ sentiments.

Department stores, the primary draw at any mall, closed. Owners went bankrupt or became absentee landlords. Banks, with no intent of reinvesting, assumed control in hopes the right buyer would show up. New shopping centers opened nearby to steal away customers.

All of those happened to Collin Creek, some multiple times.

Picture it now

It’s always the same national chains that hang around the longest in dying malls around the country.

At Collin Creek, Victoria’s Secret is still there and so is its sister L Brands company, Bath & Body Works. Foot Locker, GNC and Things Remembered are also among the last to go. Zales and Kay Jewelers closed after Christmas.

Years ago, the mall’s food court tenants were replaced by local entrepreneurs with their own menus of pitas and pretzels.

1 / 3 2 / 3Victoria's Secret, Bath & Body Works, The White Barn Candle Co. and a few other stores remain open at Collin Creek Mall.(Vernon Bryant / Staff Photographer) 3 / 3Betty Duke-Ruhd (left) and Connie Hooper (right) of Plano play bridge with friends in the food court at Collin Creek Mall/(Vernon Bryant / Staff Photographer)

Sears is winding down, already slated to close by mid-March as part of the retailer’s bankruptcy. It was busier than it’s been in years during Presidents Day weekend, with shoppers picking up tools, clothing, bedding and toys amid the fixtures that are also for sale. Red and yellow signs declare that everything must go.

J.C. Penney, an original anchor store when the mall was built in 1981, will stay open but may move during an estimated 24-month schedule for the project’s first phase, Moayedi said. (Penney still owns its Collin Creek store and parking lot.)

Penney wants to stay in Plano, its headquarters city, and Moayedi wants to build it a new store. Penney’s annual sales at Collin Creek are $20 million, which equals the average for a Macy’s, a chain that Wall Street thinks has a leg up on its department store peers. And it’s considerably more than the $13 million that an average Kohl’s brings in and about twice Penney’s own per-store average.

Penney’s two-level, 156,000-square-foot store consistently attracts shoppers from some of Plano’s oldest neighborhoods just next door to Richardson.

Macy’s left the mall in early 2017 and Dillard’s departed back in 2014. A fifth anchor, Mervyn’s, closed in 2006. Mervyn’s, which replaced original anchor Lord & Taylor in 1990, became Amazing Jake’s, an indoor amusement park.

Great Recession

Despite its emptiness, the inside of Collin Creek still looks pretty good for a 1980s mall. It has sparkling tile floors that were installed in 2007 along with new paint and signage during the last big attempt to help the mall regain some luster.

General Growth, at the time the second largest U.S. mall operator, “knew it should be turned into something else,” said Lay, who attended meetings in the mid-2000s where it was discussed.

In 2004, General Growth picked up Collin Creek when it acquired Rouse Properties, the company known for remaking Baltimore’s Inner Harbor and Boston’s Faneuil Hall. Debt from that acquisition helped put General Growth into bankruptcy in 2009, but so did the Great Recession.

Collin Creek’s revenue, excluding its anchor department stores, plummeted 20 percent during the Great Recession and kept falling, according to data from Trepp LLC, a firm that tracks commercial loans.

General Growth emerged from bankruptcy in 2010 and, a year later, it spun out 30 underperforming malls to shareholders under the Rouse name.

Other big companies also got struggling malls off their books, anticipating that they wouldn’t be able to refinance maturing loans on aging properties. Those are the malls that most often end up in foreclosure.

Moody’s Investors Service downgraded all of Washington Prime Group’s debt last week. The Ohio-based real estate investment group was spun off in 2014 from the largest mall operator, Simon Property Group, but now has relatively low sales per square foot.

Washington Prime faces $50 million in maturities this year and $357 million in 2020, Moody’s warned. In Texas, Washington Prime owns 14 malls and shopping centers, including Irving Mall, Richardson Square and The Shops at North East Mall in Hurst. Simon still owns North East Mall.

In 2014, as Rouse was being acquired by Brookfield Properties, Collin Creek and Vista Ridge Mall in Lewisville were turned over to lenders. Even with an occupancy rate of only 67 percent, Collin Creek generated enough cash flow to pay expenses until last year, according to Trepp.

General Growth was sold in 2018 to Brookfield, which now owns Town East Mall in Mesquite, Stonebriar Centre in Frisco, Hulen Mall in Fort Worth and The Parks at Arlington.

Before the sale to Centurion, where lenders took a $50 million haircut to the original value of the loan, Collin Creek was the largest commercial property loan default in North Texas, according to Trepp. Centurion paid about $25 million for 325,000-square-foot main common areas and retail spaces not including the anchor stores. Centurion has purchased the Sears store, the vacant Macy's and Dillard's, and has Amazing Jake's under contract.

What’s next?

The American mall story is still unfolding. But Collin Creek’s fate also is playing out in other cities.

In this era of retail haves and have-nots, the phenomenon is true for malls, too. Just 20 percent of U.S. “A” malls, such as NorthPark Center in Dallas, generated 72 percent of all mall sales, according to Coresight Research.

1 / 2The Collin Creek Mall sign in front of what once was a Macy's department store.(Vernon Bryant / Staff Photographer) 2 / 2A blank directory at Collin Creek Mall in Plano, Texas on Wednesday, February 13, 2019. 2018 was Collin Creekâs final Christmas. The mallâs new owner plans to redevelop the property into a mixed-use development. (Vernon Bryant/The Dallas Morning News)(Vernon Bryant / Staff Photographer)

In 2019, as another big round of store closures and bankruptcies create vacancies, the survival of the fittest malls across the U.S. already may be apparent.

By now, shifts in local economies and national shopping trends and competition have exposed weaknesses in the mall space, said Steve Jellinek, vice president of Morningstar Credit Ratings’ risk services for commercial mortgage-backed securities.

Department store space nationally declined by 13 percent in 2018 and it’s likely to shrink another 3 percent to 5 percent this year, he said. As anchors close, contract clauses can kick in to automatically reduce rent paid by other mall tenants.

Many weak malls closed from 2013 to 2016. Real estate firm CBRE has identified 24 conversions of retail spaces, including malls, that have been repurposed into industrial warehouses.

With loan payback deadlines looming, mall owners can expect lenders to work with them if their properties have long-term relevance, said Ricky Cipko, a Morningstar Credit Ratings analyst. “There’s just a lot of fear around the lending environment and it may be different in three years.”

Loans on two local malls that Morningstar tracks, Town East and Grapevine Mills, mature in June 2020 and October 2024, respectively. Jellinek said they’re “examples of malls with cash flow stability” that lenders find attractive. Some loans are being extended three to five years, instead of being refinanced.

Cipko said lenders not only look at risk but also examine the “inherent value of the place as a community gathering place and whether owners can quickly capitalize on that value.”

Consumers aren’t giving up shopping in stores. But the U.S. still has two-and-a-half times more retail space per capita than any other industrialized country. Some of that space is dying malls.

About 880,000 square feet of retail space was vacated last year in malls and shopping centers with department stores in Dallas-Fort Worth, said Bob Young, director at Weitzman, a Dallas-based commercial real estate firm. He said the region's mall graveyard includes 15 million square feet of space that's been demolished over the years or slated for non-mall development.

Upside

Surviving malls are going to be stronger and more dominant, said Steven Levin, founder and CEO of Dallas-based Centennial, a firm that invests in malls.

Too much mall space in major metro areas is a big city problem, but that’s not always true in smaller markets. In many mid-size cities, Levin said, the mall is “the only game in town.”

1 / 2J.C. Penney storefront at Collin Creek Mall in Plano, Texas on Wednesday, February 13, 2019. 2018 was Collin Creekâs final Christmas. The mallâs new owner plans to redevelop the property into a mixed-use development. (Vernon Bryant/The Dallas Morning News)(Vernon Bryant / Staff Photographer) 2 / 2The Sears has "store closing sale" signs posted at Collin Creek Mall in Plano, Texas on Wednesday, February 13, 2019. 2018 was Collin Creekâs final Christmas. The mallâs new owner plans to redevelop the property into a mixed-use development. (Vernon Bryant/The Dallas Morning News)(Vernon Bryant / Staff Photographer)

Levin said he expects about 700 of the nation’s 1,100 enclosed malls to remain viable. “It takes time, capital and expertise to make it happen,” he said. “It’s very hard.”

His company creates, owns and operates “great dominant retail destinations” but it doesn’t load up its projects with debt, Levin said. “We reinvent them and make them better.”

Centennial operates eight malls in mid-size cities, including the 40-year-old Brazos Mall in Lake Jackson, about 90 minutes south of Houston. It bought the mall in 2015 and turned space once occupied by Sears into a new wing with TJ Maxx, HomeGoods, Ulta and Ashley’s Home Store. Urban Air, an indoor trampoline park, opened in a former Dillard’s men’s store. Existing tenant Powerhouse Gym is expanding from 3,000 square feet to 22,000 square feet.

“We’re negotiating to get possession of underperforming anchors,” said Whitney Livingston, Centennial’s chief operating officer. In the last two years, Centennial bought five vacated department stores -- two Sears, two Carson Pirie Scott and a Nordstrom.

Levin said the cycle is accelerating for both malls on the decline and others that can be transformed into new productive and desirable uses.

Got to be good

That delineation is important to retailers looking to expand.

“We’re not going to be the savior,” said Ken Phipps, director of global franchise development for Dallas-based Gold’s Gym. “We won’t go into a dying mall where revitalization hasn’t already started.”

Phipps is finding that mall landlords are willing to carve out spaces of 20,000 to more than 30,000 square feet to meet his company’s needs.

In the last two years, Gold’s Gym has converted space formerly occupied by Sears, Nordstrom and Barnes & Noble, he said. Those are attractive because of their locations, parking and proximity to other retailers serving neighborhoods.

And mall owners find Gold’s Gym alluring because of the foot traffic it brings.

“We’re Amazon-proof,” Phipps said. “We can bring 8,000 or 10,000 members into a mall’s former Sears store.”

It was less than a decade ago when mall tenants didn’t want a gym because they feared their customers would have to compete for parking spaces.

“We were who they didn’t want,” Phipps said. “And now the paradigm has shifted.”

For developer Moayedi, Collin Creek’s reinvention is something he wants “to do again and nationwide.” And, so far, he’s got the community backing him.

At a night meeting in late January, he showed off preliminary plans to about 750 residents, tenants and community leaders.

“At the end of the meeting I asked them to raise their hand if they liked what they heard,” he said. “All hands went up.”

Twitter: @MariaHalkias