Economy & Economic Development  February 11, 2011

Region’s malls got mauled during Great Recession

With the Greeley Mall now bank-owned, the Foothills Mall awaiting redevelopment, and the Promenade Shops at Centerra purchased out of foreclosure by investors at the end of last year, NCBR asked the cities of Greeley, Fort Collins and Loveland to break down how the region’s struggling malls affect their bottom lines. As to be expected, sales tax collections for the older malls – Greeley and Fort Collins’ Foothills – have been on the decline for years, but sales are beginning to rebound for Loveland at the Promenade Shops.

“I have heard people suggest that the Fort Collins mall or the Greeley mall have lost sales to the Loveland Centerra Promenade Shops venue. I think this is true,´ said Alan Krcmarik, executive fiscal advisor for the city of Loveland. “Generally, mall owners/developers have to reinvent their properties every so often, maybe every five to seven years. Both the Greeley mall and the Fort Collins mall are due for reinvention, redesign, or some type of makeover. It is just the nature of the retail industry.”

Greeley Mall

On Jan. 26 – after several delays due to lack of bidder interest – a foreclosure sale was held for the Greeley Mall. The mall returned to its lender, LNR Property LLC, for $33.8 million.

That was a drop of more than $12 million from 2006, when Chicago-based GK Development bought it for $41.4 million. When the mall entered the foreclosure process last year, real estate services company CB Richard Ellis became the court-appointed receiver and took over management duties.

Bruce Backstrom, CB Richard Ellis’ managing director of asset services in Denver, said that while he is not in a position to speak on behalf of the lender, the mall is open for business and actively looking for tenants.

“I don’t know what the future plans for the mall will be,” Backstrom said. “The lender will be looking at the best way to maximize the value for its shareholders. It will take some time for them to look at the best way to accomplish this. I know that there is no intention to close the mall. CB Richard Ellis will still be handling the management after the receivership ends.”

A spokeswoman for LNR told the Business Report that the company did not wish to comment on plans for the mall at this time.

Greeley Director of Finance Timothy Nash said sales tax revenue at the mall has been decreasing for a number of years. Specifically, sales and use tax collections for the mall in 2009 were $1.28 million. The 2010 total is not available yet, but it’s estimated to be no higher than $1.17 million – about a 9 percent year-over-year decrease.

Nash does not have comparable data for the mall prior to 2009 because the city was using a different reporting system at that time.

Overall, the mall represents about 3 percent of total sales and use tax collections for the city.

“Complete closure of the mall would have a limited affect on our overall sales and use tax collections, although I would be concerned that shoppers would start shopping outside of Greeley for more of their retail purchases than just what they were spending at the mall,” Nash said.

He has not heard about any major operational changes to the mall since it returned to the bank, and thus does not expect significant changes in revenue in the near future.

Foothills Mall

Sales tax collections at the Foothills Mall have declined dramatically over the past eight years. In 2003, the city collected just over $4.1 million from the mall. By 2009, that number had been slashed by more than half to $2 million. In 2010, the mall brought the city $1.9 million.

At the same time the mall’s revenue was dropping, the city’s overall sales tax collections grew steadily from 2002 to 2007. They took a hit in 2008 and 2009 with the recession, and in 2010 were nearly back to 2006 levels.

In 2003, the mall represented 6.1 percent of the city’s overall $68 million in sales tax collections. In 2010, the mall accounted for just 2.6 percent of the city’s $74 million in sales tax collections.

Last month, bulldozers began tearing down the exterior walls of the former JCPenney department store at the 37 year-old mall. The store’s finished demolition won’t be complete until April. The move was touted as a first step toward renovation, but no one has committed to redeveloping the property yet.

Josh Birks, economic advisor for Fort Collins, says he’s working with the mall’s owner, General Growth Properties, to determine the best scenario for the community’s retail needs – and public and private financing that might be available to make it happen.

Last year, the city commissioned an economic analysis of the Midtown area, which surrounds Foothills. The consultants identified a number of suggestions and action items that might assist with redevelopment of the area, including suggestions for the mall. Birks said the city and mall’s owner are also working with the South Fort Collins Business Association, keeping them up to date on progress being made at the mall.

“Any public investment in redevelopment will be mindful of community values and generate benefit for the community, especially the triple bottom line,” he said. “Conversations and collaboration with GGP continue, but as many people know, these kinds of issues take time and patience on everyone’s part to develop and gain traction.”

Promenade Shops at Centerra

“The impact of the foreclosure on the Promenade Shops is very difficult to assess,´ said Loveland’s Krcmarik. “Throughout the foreclosure and sale process, almost all of the stores continued to be open and make sales as if the foreclosure did not exist. It was ‘business as usual’ for the most part. Some shoppers may have stayed away from the Promenade Shops because of the articles in the newspaper, but we have no way to measure that.”

The “business as usual” assessment is evident in sales tax revenue figures. Collections for the Promenade Shops dipped in 2008 and 2009, but for 2010 were at $2.2 million, slightly above 2007 levels.

Meanwhile, the city’s overall sales tax revenue has yet to rebound to its 2007 collection peak of $30.778 million. “The city of Loveland has experienced effects of the recession on the sales tax collections,” Krcmarik said.

In 2010, total sales tax collections were $30.201 million, of which the Promenade Shops represented 7.3 percent, “a significant contribution,” according to Krcmarik.

He added that while Greeley and Foothills malls are due for redevelopment, retail remains an extremely risky investment, and any new or redesigned malls may affect Centerra.

“All retail malls compete with each other,” Krcmarik said. “It is a matter of cost, selection and distance to travel. The retail offerings at Centerra and the Promenade Shops definitely draw people from other cities like Fort Collins and Greeley. They also draw out-of-state customers from Wyoming, Nebraska and other states. Loveland residents that used to shop at the mall in Fort Collins or Greeley, or even Broomfield, Boulder and Denver can now shop in Loveland.

This means some of the Loveland resident consumer dollars no longer ‘leak’ out of Loveland.”

With the Greeley Mall now bank-owned, the Foothills Mall awaiting redevelopment, and the Promenade Shops at Centerra purchased out of foreclosure by investors at the end of last year, NCBR asked the cities of Greeley, Fort Collins and Loveland to break down how the region’s struggling malls affect their bottom lines. As to be expected, sales tax collections for the older malls – Greeley and Fort Collins’ Foothills – have been on the decline for years, but sales are beginning to rebound for Loveland at the Promenade Shops.

“I have heard people suggest that the Fort Collins mall…

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