Wyoming Valley Mall’s real estate tax assessment drastically lowered

The Wyoming Valley Mall’s real estate tax assessment has plunged from $68.7 million to $13.6 million through negotiations with taxing bodies in a court-level appeal, records show.

Attorneys involved in the case say the new assessment reflects a nationwide value drop in many traditional shopping malls.

The dramatic reduction knocked the Wilkes-Barre Township mall from its ranking among the top five highest commercial real estate taxpayers countywide.

It also will sting impacted taxing bodies.

Mall owner Wyoming Valley Realty Holding LLC will pay a total $375,201 in real estate taxes under current rates, which is a reduction of $1.5 million, analysis shows.

A breakdown of the old and new yearly payments to taxing bodies based on present tax rates:

• Wilkes-Barre Area School District — $1.26 million to $251,156 ($1.01 million less)

• Luzerne County — $436,432 to $86,576 ($349,856 less)

• Wilkes-Barre Township — $188,884 to $37,469 ($151,415 less)

Properties advance to court-level mediation when the owners contest county assessment appeal board rulings. At mediation, property owners negotiate with attorneys representing taxing bodies, with the option to proceed to a County Court of Common Pleas trial if they are unsuccessful.

In this case, an agreement, known as a stipulation, was reached in April to avoid trial, according to the court docket.

Wyoming Valley Realty purchased the property for $17 million in August 2021 and filed the court challenge that year.

Fair deal

Representing the mall owner, Attorney Francis Hoegen, of Hoegen & Associates in Wilkes-Barre, said his client had an appraisal concluding the property value was less than $13.6 million. During settlement negotiations, the mall owner also learned anchor tenant Macy’s intends to close its store, Hoegen said.

“So in theory, our value could be even less because the original appraisal relied on income from the Macy’s rent,” Hoegen said. “We could be paying less based upon appraisals and changed circumstances with the loss of Macy’s, but my client felt the deal was fair and as a result resolved the matter.”

Macy’s corporate communications released this statement:

“Our new strategy is designed to create a more modern Macy’s, Inc. and enhance the customer experience. We intend to close approximately 150 Macy’s stores while further investing in our 350 go-forward fleet over the next three years. A final decision on specific locations has yet to be made.”

“There is a current evaluation underway comparing the potential real estate value and the future sales growth profitability potential,” it said. “We look forward to continuing to serve our customers at this time.”

Hoegen said he has handled numerous appeals for Pennsylvania mall owners and has observed a sharp decline in the value of regional malls in less densely populated areas.

“People have pivoted to online shopping, and the biggest victims are retailers located in the shopping centers,” he said.

Due to the settlement, taxing bodies must refund overpayments for 2022 and 2023. Refunds date back to the filing of the assessment challenge.

As a compromise, the settlement gradually decreased the assessment to $32.6 million in 2022 and $14.9 million in 2023 before fixing it at $13.6 million for 2024 and forward, the stipulation said.

“I think in the end each party got a result that was acceptable to them, and, therefore, we entered into a settlement agreement,” Hoegen said.

Difficult negotiations

Attorney John Rodgers, who represents the township, said many malls have been struggling across the country.

“The values have declined substantially with many indoor malls, and the Wyoming Valley Mall is no different,” he said, noting its loss of anchor tenants, such as Sears and the Bon-Ton.

Reaching an agreement on such a major reduction was “not an easy process,” and each taxing body independently scrutinized the appraisals, Rodgers said.

“It was difficult for everybody. As with any other negotiations, at times it became contentious because everyone was arguing on behalf of their client,” he said.

At the end of the day, the focus was on what a prospective buyer would likely pay for the mall, with the 2021 purchase price at the forefront, Rodgers said. That purchase also included two parcels that were subsequently split off and sold — a strip mall and section of the mall housing an auto center, property records show.

“The assessment was so out of whack compared to the value, there’s nothing else you could really do other than reach an agreement, so everyone worked together on it,” Rodgers said. “When everything is said and done, I feel we did the best we could.”

Rodgers said he believes the assessment would have been lower than the settled amount if the case had gone to trial.

Wilkes-Barre Area School District Solicitor Ray Wendolowski said the district wants all property owners to pay their fair share, which could mean agreeing to reductions when warranted and seeking increases through reverse appeals when the assessments appear to low.

“We strive for fundamental tax fairness,” Wendolowski said.

In this case, the appraisals, the mall’s loss of major anchor tenants and other evidence warranted the reduction, he said.

“The numbers just don’t support the value it had as far as its assessment,” Wendolowski said.

He agreed with Rodgers that the assessment settlement is likely better than the amount that would have been set through a court trial.

A settlement is still pending on a separate appeal that had been filed by the prior mall owner — GSMS 2014-GC18 Wyoming Valley Mall — that will determine what assessed value should be assigned to the property for 2020 and 2021.

The mall had been assessed at $76.1 million during those years and was lowered to $68.7 million in November 2022 after the strip mall and auto center were sold and assigned new parcel identifiers and assessments, records show.

County property records link the current mall owner, Wyoming Valley Realty Holding, to Florida-based 4th Dimension Properties LLC, which owns more than 25 regional malls throughout the country, its website says.

In a post entitled “reimagining the future of shopping centers,” the 4th Dimension site sees malls as “places for more than just shopping.”

“Shopping malls are social spaces where members of a community interact with each other, and where local businesses can prosper alongside national brands, in public high-traffic settings,” it said. “Our goal is to transform shopping centers into community hubs where entertainment, shopping and food all come together.”

Top properties

With a $248 million assessment, Talen Generation LLC’s nuclear power plant in Salem Township remains the highest-valued property in the county, according to county reports.

The Mohegan Pennsylvania casino complex in Plains Township is next in line, with parcels currently totaling $151.7 million, records show. Officials have said this assessment will be rising to $157 million through a court-level settlement.

The massive Niagara Bottling beverage manufacturing plant in Hazle Township follows with an assessment of $70.9 million. Owned by California-based Warrior Trail Properties LLC, the 1.27 million-square-foot production facility sits on 91.51 acres in the Humboldt Industrial Park. That project was coordinated by the Governor’s Action Team, according to prior reports.

Now that the mall is off the roster, the next highest assessment is $58.5 million for the Hanover Township distribution center occupied by True Value Company. Owned by Dallas, Texas-based Granite 12 Tradeport LLC, the property is currently in a real estate tax break program that applies to the structure but not the land.