The city of Balcones Heights is shopping its ownership in Wonderland of the Americas.
Four years ago, acting on a suggestion by the city administrator at the time, the City Council voted in favor of buying a 46% stake in the 1960s-era mall.
It was a $5.4 million investment that the tiny municipality in northwest San Antonio had hoped would generate cash and attract developers — a monumental concept, according to the city’s economic development director.
Now with the anticipated $750,000 in annual distributions not rolling in, and maintenance costs for the aging property an ever-present reality, officials are taking a hard look at their options.
“We’re trying to figure out how best we can navigate through all this, inclusive of getting somebody within the existing partnership to either buy us out, or find a solution for us to make the city whole,” said Gilbert Perales, interim city administrator since September.
For now, that means better budgeting of mall expenses and management, he said.
Crossroads Mall Partners
Balcones Heights is a bedroom community at the crossroads of one of the most traversed highway intersections in the one-square-mile city. At 36 acres, Wonderland is Balcones Heights’ most prominent property and contributes sales tax revenue essential to funding city services.
After peaking in the 1980s, shopping malls across the country began dying off before 2000 when consumer shopping habits began to change. The pandemic only accelerated their decline.
By 2009, Wonderland Mall was run-down and its storefronts were increasingly vacant of major retailers. That’s when Crossroads Mall Partners, led by Sid Weiss, bought the mall, gave it a makeover and brought in new tenants, including medical clinics run by UT Health and the Veterans Affairs.
In 2013, VIA Metropolitan Transit began eyeing the property as a potential transit-oriented development opportunity, one that could incorporate public transportation, retail and residential, but later backed away from those plans.
In February 2021, Balcones Heights leaders, acknowledging the city’s future was dependent on the success of Wonderland, agreed to negotiate a deal with Crossroads Mall Partners.
“Because Wonderland is the largest piece of property in the city, my fellow council members and the city staff felt that it was very important to make this purchase so that the city could be involved in all decision-making and future plans and for the development of the property,” said longtime Mayor Suzanne de Leon.
In November of that year, the Balcones Heights Economic Development Corporation financed the purchase of a 45.7% stake in the mall with a 20-year loan and an interest rate locked in at 3.79%. The loan came with the prospect of a balloon payment at 10 years.
But in the years since, the annual partnership dividends the city was counting on have not fully materialized, Perales said, adding dividend payments started small and have “pretty much dried up.”
The city also planned to relocate some of its offices and its courtroom to the mall but that is still in the works, de Leon said.
Development ‘not viable’
The mayor, who is up for reelection May 4, said Wonderland and its convenient health care assets is “good for the community.” De Leon stands behind the decision to buy into the mall, saying the payoff is long-term.
Her opponent, Johnny Rodriguez, served as mayor of Balcones Heights from 2000 to 2002. Rodriguez was against buying a stake in the mall and said he advised officials against it.
“This is not a very smart move and I would not suggest you do it, because … it is a very high-risk, commercial piece of property and a governmental entity … should never get involved and get into a business in retail development, in commercial development,” he told them. “But they dove into it and now we’re paying the price.”
Rodriguez said he stopped attending council meetings around the time the mall deal was struck. “Enough is enough for me,” he said.
De Leon stands by the decision to become part owner of the mall. “The partnership protected the city and Wonderland from losing value, and sales and property taxes to the city,” she said. She would support selling the economic development corporation’s shares only if the city’s vision to develop quality housing, restaurants, shops and walkable community space is fulfilled.
“And of course, the dollar amount has to be right,” de Leon added.
Lorenzo Nastasi, director of economic development and public affairs for Balcones Heights, said current economic conditions have made new development on mall property “not viable.” He said his office briefly visited with several developers last summer. “Construction costs, the cost of money right now, it just doesn’t make it worthwhile,” he said.
Still, Wonderland has a prime location going for it, he said. “One of the great assets of the Wonderland property is its accessibility on Fredericksburg Road, on Crossroads Boulevard, on Loop 410,” plus direct access from all four sides of the mall. Not many of the newer shopping meccas in San Antonio have that.
With the property’s attributes and the city’s due diligence prior to joining the mall partnership, Perales said there was no reason to believe it wouldn’t deliver the anticipated revenue of three-quarters of a million dollars a year. There was only one problem — the budget did not account for how costly it would be to maintain a 60-year-old facility like Wonderland and its elevators, escalators and heating and air conditioning systems.
As a result, those costs “ate up almost every bit of available cash revenue that was being generated” by the mall, Perales said.
The city administrator said he has dealt with the problem of “surprise” bills by requiring Weiss, as the property manager, to budget for maintenance requirements.
The city’s budgeting woes also are compounded by revenue loss from its red-light camera program coming to an end in May, a newly negotiated agreement with the Balcones Heights Police Officer’s Association and rising health benefits costs for city employees.
The 2023-24 budget has a property tax rate increase to $0.604 on $100 of property valuation, from the half-cent rate it has had for the past seven years. The increase is expected to generate just over $2 million of tax revenue for the fiscal year 2024 budget.
To maintain its current level of city services, the city also “redesigned” its employee benefits plan and laid off a city staffer who enforced the red-light camera program.
Perales expected tax revenue to increase with new businesses coming to the area, including new restaurants and a car wash. “So we’re attracting other folks to invest, but it’s a slow process,” Perales said.
He is also ensuring the city takes a more active role in managing the tenant mix in the mall and working to attract sales tax-generating businesses in addition to the medical and dental offices.
“In that sense, we’re making money based on the new level of activity that’s occurring there,” Perales said. “So we’re making up some ground. Not to the extent of $750,000, but it’s still a positive move on our side.”
