Foothills Mall saga: Planned makeover evaporates

FORT COLLINS – Foothills Mall general manager Cynthia Eichler began 2008 as she had 2007 and 2006, with high hopes that a much talked-about redevelopment proposal would resurrect the out-of-date retail center and give it new, 21st-century life.

General Growth Properties Inc. (NYSE: GGP), the Chicago-based real estate investment trust that owns Foothills and 240 other mall properties, had once again assured the mall’s staff, retail leaseholders and city officials who had negotiated incentives for the plan that the time was nearly at hand.

But by April, Eichler’s hopes were dashed, along with those of others who had huge stakes in Foothills’ future. The potential for a new lease on Foothills’ life vanished when a linchpin lease with prospective anchor Dillard’s department stores evaporated, with the retailer saying it had eliminated Fort Collins from its expansion plans.

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By November, General Growth itself was in serious trouble as the debt-ridden company’s stock lost 99 percent of its value, skidding from $49 per share in December 2007 to 35 cents just 11 months later.

Falling dominoes

Foothills’ tenant numbers continue to dwindle. Earlier this year, The Gap bowed out. The latest loss was B. Dalton Booksellers, with a prominent location just inside the mall’s main entrance, announcing it would close in January. And this month General Growth hired hotshot Chicago law firm Sidley Austin LLP to handle its pending bankruptcy. It seems any talk of redevelopment apparently will have to involve other players.

People who make their careers analyzing the Front Range retail industry say that while uncertainty reigns, serendipity could also be in the wings.

“This is what someone called the ‘opportunistic period,’´ said Byron Koste, director of the real estate center at the University of Colorado Leeds School of Business. “Someone’s going to take a fresh look at that place and see something that no one else has seen. All the conventional players have fallen on the battlefield. Someone will say, ‘I have some uses that are compatible with that location,’ and they will most likely be uses other than what you see there now.”

A mixed-use remake is the opportunity that most knowledgeable observers mention. Fort Collins officials who had worked with General Growth for years on proposals for redevelopment say they’re looking forward to working with a new partner. They’ve drawn parallels in recent months to overhauls of aging, enclosed malls in Denver – Cinderella City and Villa Italia – into new, multi-use neighborhoods.

City as ‘broker’

City Manager Darin Atteberry and Finance Director Mike Freeman were winging to Chicago for talks with General Growth executives about the mall’s future as the Business Report was headed to press.

In effect, the city is engaged in brokering a possible deal between the downtrodden mall owner and a possible buyer. Atteberry said several had shown interest in the 700,000-square-foot mall and the surrounding acreage that adds another 200,000 square feet of retail space.

“We see working with another partner, someone other than General Growth, in the future,” Atteberry said prior to the Chicago trip. “There are a number of people who we know are very interested. It’s a very attractive property, one that comes with a very valuable city partnership.”

What the city manager alludes to is the likelihood that a package of city incentives – tax breaks, development fee waivers and the like – that General Growth negotiated would remain in place for a new owner. After all, the Fort Collins City Council unanimously supported those measures in considering General Growth’s proposal.

Looking south

If a new owner – in partnership with the city – is to make something of Foothills, then a look southward might provide some inspiration. Boulder has been down this road before, with the redevelopment of the crumbling Crossroads Shopping Center into the new Twenty-ninth Street, an outdoor, plaza-oriented mixed-use center.

Steve Laposa, professor in the Everitt Real Estate Center at the Colorado State University College of Business, has almost literally written the book on how retail centers like Crossroads fall, and how they can be picked up again.

As head of a real estate research arm of consulting mega-firm Pricewaterhouse-Cooper, Laposa authored the “Greyfield Regional Mall Study” for the Congress for the New Urbanism, a far-reaching study of mostly older, indoor malls in decline.

This semester at CSU, Laposa has been  directing teams of his students in projects that suggest how Foothills might be remade.