Balcones Heights to acquire ownership stake in Wonderland of the Americas mall

The city of Balcones Heights is set to become a commercial real estate investor after

The city of Balcones Heights is set to become a commercial real estate investor after its city council agreed this week to buy an ownership stake in Wonderland of the Americas.

The mall — a mix of discount stores, medical offices, mom-and-pop businesses, quirky events and Santikos Entertainment’s Bijou movie theater — is the largest property in the suburban city of about 3,000.

The city’s Economic Development Corp. will borrow $5.4 million from Truist Bank to buy a 45.72 percent interest in the mall at Interstate 10 and Loop 410, which Crossroads Mall Partners Ltd. has owned for over a decade.

City officials say the deal will provide a new source of revenue to Balcones Heights, which covers less than 1 square mile.

Much of the land in the city is commercial property. The residential tax base consists of about 240 houses and 1,400 apartments, said Lorenzo Nastasi, executive director of the EDC and the city’s director of economic development and public affairs.

The deal is projected to bring in about $300,000 to $350,000 annually for Balcones Heights, which has a budget of $9 million. That income could fluctuate depending on occupancy levels at Wonderland and tenants’ ability to make their rent payments, Nastasi said.

Wonderland of the Americas mall clock tower is seen Sept. 1, 2021.

Wonderland of the Americas mall clock tower is seen Sept. 1, 2021.

William Luther /Staff

The city will sublease about 15,000 square feet at the mall from the EDC, nearly rent-free, as collateral for the loan.

The space, which was previously leased by Anna’s Linens until it closed, could be used to house a city department or a community center. Moving municipal court to Wonderland, for example, could generate more foot traffic for mall tenants if visitors stop at a store or the food court while there, Nastasi said.

People wait in line at Wonderland of the Americas mall to receive their COVID-19 booster shot.

People wait in line at Wonderland of the Americas mall to receive their COVID-19 booster shot.

Jessica Phelps /San Antonio Express-News

Acquiring an ownership stake also gives the city a say in the mall’s future.

“As we move forward, the prospects of redevelopment on the property and the highest and best possible use of the space here continues to be a priority for everybody,” Nastasi said. “But there are no specific plans at this point.”

After the city determines how it will use the 15,000 square feet of space, he expects “we will start exploring options for other things on the property.”

Sid Weiss, managing co-general partner of Crossroads Mall Partners, said the deal is a “win-win” and “insures the long-term viability of the property.”

“I believe the city of Balcones Heights and its city council and Economic Development Corporation have shown extremely long-term vision for their city by committing to being a part of the future of Wonderland of the Americas and its continuing redevelopment,” Weiss said.

Subject to ‘whims of the market’

What Balcones Heights is doing is unusual.

Cities often use EDCs to attract industrial development, said Adam Perdue, a research economist at the Texas Real Estate Research Center at Texas A&M University. He said he has not heard of an EDC investing in a mall.

“Balcones Heights is now subject to the same whims of the real estate market as any other investor or developer,” Perdue said. “If their bet works out, they make money. If it doesn’t, they lose money.”

There’s also “the concern of playing with other’s people money,” he said. “Why do we necessarily think that the city is going to be better at deciding what should go here?”

The EDC should consider how any changes or new developments at the mall would affect neighbors, Perdue said.

“We would hope that Balcones Heights would take into account any external benefits or costs, unlike another investor would, and that would be a good thing,” he said. “You can see both sides.”

Wonderland’s history

The mall opened to great fanfare in 1961, under the name Wonderland Shopping City. It was the first regional mall in the area. It was big, at 650,000 square feet, and pricey. Its construction cost an estimated $7 million.

The property later changed hands and underwent renovations. But as department stores closed and other local shopping centers opened, the mall tried to adapt but struggled.

It’s now a mix of discount stores such as Burlington and Ross Dress for Less, Veterans Affairs clinics, medical offices and mom-and-pop stores that occupy an area called the Little Shops at Wonderland. Target operates a store there but is not accessible from the mall.

It’s 86.5 percent occupied, and mall management is in discussions with several potential tenants and aims to finalize leases early next year, Weiss said.

“Sales this year have been extremely good at several of the major retailers in the property,” he said. “The property has had a positive operations cash flow for the last 10 years, and we continue to be optimistic about the future of Wonderland.”

The mall hosts the Balcones Heights Jazz Festival as well as unconventional events such as the Monster-Con horror convention and Wonderland UFO Festival. It is also one of the largest voting sites in Bexar County, and earlier in the coronavirus pandemic University Health converted its space there into a vaccination site.