By Erin Olson-Douglas’ reckoning, Merle Hay Mall owners have been negotiating with the city of Des Moines for the last nine months or 10 years, depending “on how you want to count.”

Little doubt that the mall has been swept up in the restless habits of its shoppers over the last decade and those negotiations have been an effort to help the owners of the city’s first shopping center to react quickly to changing trends.

“We always sought to meet the needs of our marketplace because you can’t fight the market and win,” said Liz Holland, who for the last 20 years has guided operations of the mall her grandfather, Joseph Abell, opened in 1959.

In play these days are efforts to recover from the shuttering last year of two anchors — Sears and Younkers — that opened with the mall in May 1959. Oh, sweet 1959, when big department stores seemed invincible and certain to draw shoppers and propel lease agreements with smaller operators.

The mall was a strip center in those days and operated as Merle Hay Plaza, with the name Merle Hay suggested by Younkers officials in honor of Merle David Hay, the first Iowa serviceman to die in World War I. When it opened, the lower level of the mall was a bomb shelter, and the mall was built in part with the benefit of federal tax credits that were available for civil defense rated buildings.

“It used to have bunk beds and canned goods,” Holland said. “In 1972 bomb shelters weren’t so in anymore so we built the bowling alley and garden court.”

Also in 1972, the mall was enclosed and Younkers Store for Homes and Montgomery Ward were added as anchors. Both stores are gone today, with an IHOP and parking lot occupying the old Ward’s site on the west, or Urbandale, side of the mall. The Urbandale City Council recently rejected plans for an apartment building just north of the IHOP.

Kohl’s replaced Younkers Home for Stores in the early 1990s. A $20 million overhaul in 2000 included the introduction of Famous-Barr in place of Montgomery Ward. Famous-Barr left town and Younkers relocated to its large vacant space. The original Younkers store was demolished and Target was built in its place and became another anchor in 2005.

“The traffic really changed after Target opened,” Holland said, with the multi-themed store attracting “daily needs” shoppers.

Target, going against its instincts, agreed to provide an entrance to the rest of the mall. That provided the mall with two main entrances, the other being at the Sears store, that provided access to 60,000 square feet of retail between them.

By 2008, Holland was planning additional changes. Stores were reoriented toward Merle Hay Road, and there were streetscape improvements. The city created an urban renewal area and established a tax increment finance district to redirect up to $400,000 a year over 15 years to the mall. The TIF payments began in 2010. 

In 2013, the development agreement was modified a second time, this time to accommodate reconstruction that resulted in Flix Brewhouse. The deal provided four annual payments of $400,000 beginning at the expiration of the original, 15-year TIF. 

With the unique movie house in hand — as Holland points out, moviegoers can sip a microbrew, eat dinner and watch a movie — Merle Hay Mall had all the elements of a destination.

Holland is among several retail experts who believe Greater Des Moines is over-malled. It is a two-mall town with four malls. 

“Nationwide, there is a huge contraction of demand for retail space,” Holland said. “We don’t need as many stores, so retailers are becoming pickier about where they go.”

Two kinds of retail centers survive, she said, those that offer convenience and easy access — “We see it in Starbucks; if it isn’t on the go-to-work-side of the road, it will suffer. If it is not near an interstate, Target will suffer — and destinations. Think Flix Brewhouse.

Little doubt that e-commerce is transforming retail, but it has not eliminated the need for brick-and-mortar stores, Holland said.

Des Moines has stuck with the mall as it has negotiated a series of transformations. On Feb. 4, the City Council approved the third version of a development agreement first adopted in 2008. By the time the agreement expires in 2031, mall ownership could receive up to $12.4 million in tax increment finance revenues.

Some quibble about whether the city should provide that much underwriting for a retail center, but it is difficult to argue with the results. Some of the TIF revenues generated in the urban renewal area in which the mall operates have led to a complete overhaul of neighboring retail centers along Merle Hay Road. Some of those changes are spreading east along Douglas Avenue and should result in renewal along the western stretches of the street, Olson-Douglas said.

Under the current terms of the agreement, the city is asking mall ownership to do more than recast the retail layout. It also must develop a master plan for the 75-acre property that includes uses such as office, hotel, housing, entertainment and recreation, along with an emphasis on pedestrian connections, transit access, and stormwater improvements for both existing and new development.

Mall owners will receive annual payments of $400,000 for three years. Payments in years four through 12 of the agreement would be delivered only if Sears, on the Des Moines side of the mall, is acquired by mall ownership or a related entity.

Right now, purchase of the building is a tough chore. Polk County supervisors have approved a $2.5 million loan at 1 percent interest to help mall ownership — the Abell family remains as majority owners — acquire Sears and Younkers properties. The Younkers building will have to be bought out of bankruptcy auction, as could the Sears building. A hearing Feb. 14 in the Sears bankruptcy could determine the method for its acquisition.

Still, Olson-Douglas believes the package is worth the gamble. A revitalized mall is key to the vitality of the Merle Hay neighborhood, for one thing.

For the mall, Holland is considering a range of family-themed entertainment and dining options. She is intrigued by the thought of creating housing for folks age 55 and beyond in the mall’s office tower and at the site of the former Merle Hay Cinema, another faded icon that at one time boasted the largest movie screen in the city.

Holland and the city are prepping for another transformation.