East Hills Mall scrambles to pay electric bill
| Tuesday, Jul 12 2011 08:06 PM
Last Updated Tuesday, Jul 12 2011 08:48 PM
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At a time when the East Hills Mall is having trouble paying its PG&E bill, Ian Ranney, owner of Leeters, a competitive gaming lounge at the mall, has plans to expand his business at the East Hills Mall.
Erika Dixon has been over a lot of hurdles to keep her two businesses, Skull Harbor and Halle Rose's Fantasy Tea Parties, open at the East Hills Mall but she remains optimistic.
PG&E has reached a payment plan agreement with East Hills Mall after having previously warned tenants of the bankrupt mall that power could be shut off Thursday if a past due electricity bill was not brought current.
The San Francisco-based utility giant declined to go into specifics on the terms of the agreement or the amount owed, citing customer privacy, but spokeswoman Katie Harlan said in general "we try to work with customers who can't pay their bills, and only disconnect service as a last resort."
The mall has to come up with $39,000 by Thursday and is struggling to do it. East Hills lowered rents repeatedly over the years when tenants smarting from a decline in foot traffic couldn't honor their lease agreements, so it has very little cash flow.
Real estate investment banker Nick Danesh, head of the mall's ownership entity, BH Mall LLC, showed a reporter a PG&E billing statement dated June 22 that indicated a balance of $129,200.13, including $112,556.85 that was past due.
He insisted he's doing the best he can under the circumstances, showing bank statements documenting that the mall paid PG&E $9,000 in June and $25,000 in May.
But Warren Mayhew, president of Hope Christian Stores, said he thinks the mall has been mismanaged.
"We haven't had good air conditioning for two years, and we don't have any anchors, and now this," he said.
Tuesday, Danesh said PG&E was requiring half the balance owed by Thursday, and would permit the remainder to be paid in monthly installments.
He called a meeting of about 60 mall tenants to explain the situation, and to ask for their help bringing the account up to date.
"If we work together, we can get through this," Danesh said in an interview afterward. "We won't give up."
The 178,000-square-foot northeast Bakersfield mall has struggled since losing all its major anchors, including Gottschalks and Mervyns, which both went out of business.
BH Mall filed for Chapter 11 bankruptcy protection in November 2009, listing debts between $1 million and $10 million, and assets between $10 million and $50 million.
Danesh said he fell behind on the electric bill after lowering rents and eliminating fees for common area maintenance in order to reduce a troubling vacancy rate.
After a period of being almost empty, today the mall is nearly full, although the overwhelming majority of tenants are independent merchants selling inexpensive goods.
Danesh hoped the higher occupancy rate would lure anchors and eventually allow him to raise rent again, but that never happened.
The electricity bill is eating up roughly half of East Hills' monthly income of not quite $50,000 a month, he said.
Danesh said he did what he could to conserve, including running the air conditioning at diminished capacity. That angered some merchants, who brought in fans and portable swamp coolers.
The free ride on common area maintenance fees will obviously have to stop, Danesh said. He simply can't afford to do it anymore.
Now, merchants have a choice. Help the mall pay the electric bill or break a lease and find a new location.
Merchants were mulling their options after Tuesday's meeting, and reaction ran the gamut from outrage that they weren't notified sooner to resignation.
"We've been here 11 years," said Belinda Bean, owner of All Star Dance and Gym. "There really isn't anywhere else to go on the east side of town. It's a lot to ask, but if everyone is willing to try to pitch in, then we can make it."
Erika Dixon, owner of the twin party venues Skull Harbor and Halle Rose's Fantasy Tea Parties, said fair or not, stores have to be realistic.
"If I picked up my two businesses and walked away, I'd be paying 13 times (the rent) I'm paying now," she said. "If you're here, you're here because you can't afford to be anywhere else, so button your lips and quit complaining and let's work together and do what we have to do to save this place and keep our businesses open."
In spite of it all, some merchants remain optimistic about the mall's future.
Ian Ranney, owner of the teen gaming lounge Leeters, said he hopes to relocate to a larger space within the mall.
"I think a lot of the problem with the struggling stores is they're trying to act like they're in a normal mall where you can just get by on walk-in foot traffic," he said. "This isn't that kind of place. You have to bring people here. The stores that are making it are doing that, doing their own outside advertising and marketing. We pretty much pretend like we're in a strip mall."
Lucas Maximiliano was particularly dismayed after the meeting because in April he signed two-year leases for two businesses: a health club called Finatico Fitness Systems; and Bako Starz, a media center where customers can host live web shows.
Maximiliano has spent thousands of dollars to remodel both sites and planned to hold grand openings next month.
"We'll do what we have to do to keep our doors open, but we'd like to see a future plan," he said, noting that the mall could find itself in the same boat a few months after the bailout.
Danesh said he still hopes an anchor will come through, and pointed out that Save-Mart has purchased the old Gottschalks building and is looking for a tenant.
There's also the possibility that someone will buy the whole mall, which is for sale.
"We've had some unrealistic offers from people trying to take advantage of the situation, but nothing serious," Danesh said.
Merchants with exterior doors to the parking lot hope to stay open even if PG&E cuts the power Thursday. They pay the cost of lighting for their individual units and can cool the spaces with fans and portable equipment, they said.
But the city's chief code enforcement officer, Randy Fidler, said he wouldn't allow that because it would pose a health and safety hazard. Among other things, there must be multiple exit routes and lighted exit signs in case of a fire, he said.
The mall was testing generators Tuesday as a back-up plan.
Regular customers worried when they learned what was going on.
Fatima Richardson, who works as a caretaker for the developmentally disabled, brings about 10 clients to the mall every week to eat lunch and catch a movie at the discount movie theater.
"We enjoy it here," she said. "It's a nice little outing for us. I really hope it doesn't close."
