Retail trends threaten business as Providence Place Mall owners seek to extend the 1996 property tax treaty for another 20 years while trying to “reinvent” the downtown shopping complex. I am warning you.
The mall’s first tax deal is set to expire in 2028, and if no new deal is signed by then, the taxes for building owner Brookfield Properties will be similar to most brick-and-mortar retailers. And it will soar as mall revenues continue to falter.
This year, the mall paid the city $1,006,234 under existing tax agreements. Without a deal, the mall’s taxes are estimated to be up to $25 million annually.
“…e-commerce growth accelerated by the COVID-19 pandemic has forced more people to buy traditional retail goods online, leading to the closure of domestic retail department stores, including Nordstrom and JC Penny. The text of the proposed deal, filed at , states that “competition for retail mall tenants in the market is challenging the viability of the Providence Place Mall.”
The proposed tax treaty extension will begin in 2028, and mall owners will pay $4.5 million in taxes each year through 2048. Also, if Moll’s income increases or decreases by 10%, he can increase or decrease his tax payment by 10% every three years. .
The city has given property tax incentives to many large commercial properties in recent years, but these deals are typically made in exchange for new developments that are expected to generate additional economic activity. increase.
The proposed mall tax cut would essentially reward malls for not going out of business.
“As city leaders, we have a responsibility to ensure that the facts are heard and presented by owners,” City Council Speaker John Igliocci said in a news release about the proposal. All tax treaties must reflect fairness across the board. ”
The deal is one of two high-profile tax cut proposals being considered by the Board as we approach the post-election “lame duck” period, which runs from Nov. 8 until next year’s swearing-in of new members.
The other is the Industrial Trust Tower 30-year tax treaty. It’s part of his $220 million redevelopment plan to convert a 26-story office building into apartments. By comparison, under the proposed “Superman Building” treaty, the owner’s tax bill would remain below $1 million until 2042, and by 2052 he would reach $2.2 million.
Apartments, services may appear at Providence Place Mall
In order to keep the business going, the proposed mall agreement says Brookfield hopes to “reinvent” the shopping complex by adding apartments, service businesses and medical facilities not found in traditional malls. is hoping for
The building’s combination of uses could include retail with “offices/workplaces, dining, entertainment, health and wellness facilities, arts, education, housing, medical” [and] “Community Fulfillment Services,” the proposed ordinance states.
Brookfield didn’t answer questions about how he specifically wants to change the mall.
Unlike many tax deals presented to the council, this one was not put together by the administration of Providence Mayor Jorge Erorza.
And Errolza, who is on a tenure and is stepping down at the end of the year, made it clear on Friday that he would not rush a mall tax deal before his successor, possibly unopposed Democrat Brett Smiley, took over.
“This is something we’ve been working on for years and our last contact with Mall was over a year ago,” Elorza said Friday. I told them that if they wanted it, they would have to pay more.”
Errolza said he’s trying to work out as many “hashes” as possible before the next mayor takes over, but sees the expiring mall tax deal as a great opportunity.
“My default thinking is that this is a long-term one that won’t start until 2028, and the next administration will have more leverage in the terms of the negotiations.
Chicago-based Brookfield Properties purchased the mall and other assets of previous owner General Growth Properties in 2018.
Elorza recalled their reaction at a meeting after the sale was completed, saying that without a new treaty the full tax bill would be more than $20 million.
“I’m not sure I read the room correctly, but they gasped,” he said.
What do Smileys think about extending mall tax breaks?
“As I said in my campaign, I want to better understand the mall’s long-term vision and plans before committing to the right tax regime going forward,” Smiley wrote. We have to adapt to those changes, and yet the Providence Place Mall is a major infrastructure asset and investment in the heart of downtown.”
Last year, after the pandemic closed the mall for months, the Providence Place mortgage defaulted and Brookfield considered refinancing.
“Providence Place Mall asset performance continues to trend downward due to the impact of the coronavirus pandemic,” rating agency Fitch wrote in April, adding that “2021 net operating income is still at pre-pandemic levels. It’s not stable, it’s declining,” he added. It is down 16% from 2020 due to lower parking and other revenues and higher operating costs. ”