NORWALK, Conn. – Yes, Norwalk is going ahead with allowing mall developer GGP to make its pitch to various governmental bodies, asking to build The SoNo Collection without building a hotel over Bloomingdale’s, to pay the city $3.5 million instead.
The discussion at Tuesday’s Common Council meeting featured GGP defending its request, responding to public criticism, and Mayor Harry Rilling explaining what commenter Diane Cece, at the beginning of the meeting, called the “back room negotiations” to arrive at what was announced seemingly as a done deal.
“The deal that was in the paper is still technically in negotiation?” Council member Faye Bowman (D-District B) asked. “…It is just getting to the stage where it is technically on the table?”
“The meetings that were held with Council leadership and others were to try to come to an agreement or an arrangement that we felt everybody could buy into. A proposal,” Rilling said.
“In other words, we are still on Let’s Make a Deal instead of The Price Is Right,” Council member Steve Serasis (D-District A) said.
“If that’s the way you want to put it,” Rilling said, laughing along with others.
The Council voted 12-1 to go ahead with the process after adding a requirement that at least two public hearings be held, at the request of Council member Shannon O’Toole Giandurco (R-District D) and Minority Leader Michelle Maggio (R-District C).
That was after Redevelopment Agency Executive Director Tim Sheehan explained that three public hearings were likely. RDA will hold one hearing each on the proposed changes to the Urban Renewal Plan and the Land Disposition Agreement; Planning Committee Chairman John Kydes (D-District C) said his Committee would also hold a public hearing.
Public comment is welcome at all the meetings, Sheehan said. The Zoning Commission will also have a public hearing, Attorney William Hennessey said, representing GGP.
Although GGP is requesting an expedited process, Sheehan acknowledged that the Boards and Commissions will take the time needed to consider the request.
GGP is reportedly planning to begin digging a foundation in early May ahead of the approvals in an effort to open in October 2019 to satisfy its deals with Nordstrom and Bloomingdale’s. If that deadline is not met GGP will lose one of its anchors, Hennessey said.
“I strongly believe that a project that will produce in excess of $5 million annually in tax revenue and over 2,400 full-time jobs should at least have its developer heard and the request entertained,” Kydes said, opening the conversation.
GGP hired a hotel architect and a hotel construction company, trying in earnest to make the hotel work, and spoke to “upwards of 12” hotel vendors, GGP senior planner Doug Adams said.
“The feedback was very consistent,” he said.
Last summer and fall, GGP began discussing the possibility of not building a hotel, and in December one of the final candidates backed out, he said.
“I think everyone here is disappointed but again we are out of time in terms of trying to get something to work, when we are certain it won’t work,” Adams said.
Council Finance Committee Chairman Bruce Kimmel (D-At Large) asked Adams to respond to criticisms levied by Bob Welsh, who studied GGP’s figures and concluded that dropping the hotel will save the company $2 million a year, while Norwalk gets the equivalent of $200,000 a year for 17.5 years.
“The net operating income of the property doesn’t include a lot of the other corporate overhead,” Adams said.
Adams spoke of dividends to shareholders and the cost of capital.
“Your company is set up a certain way,” he said. “To look at just those top line metrics, I think is not a fair representation. If that gap is $2 million in income between the two, that income gap has a valuation.”
You might say you could build a house for $550,000, knowing that the end result will be worth $300,000, and accept the $200,000 loss, he said.
“There is a value to that income stream that is just unsustainable to just accept that as a loss. It takes the overall project to a place where the company would not invest the capital,” Adams said.
Again, GGP does not develop hotels and needs a partner in the venture, which would look at it as an independent investor would, he said.
“They have all come to the same conclusion,” Adams said, repeating earlier statements that the hotel is “50 percent off what the minimum hurdles are.”
“I cannot take that drag from the non-core asset and, for lack of a better word, bury it in my asset when I am a publicly traded retail group,” Adams said. “The two do not mix. I need to keep them both standing on their own if they are going to work.”
Serasis asked why 50 percent is not feasible.
The property is unique; to build the core asset, the mall, “there are certain dimensions and size that need to be maintained and the site is extremely tight with boundaries that cannot be modified,” Adams said, mentioning the railroad line, West Avenue and Interstate 95.
Not only that, but a hotel needs curb appeal and there’s only one place it fits into the design. It needs to be a high rise to fit in, but it would compete with less expensive ground-based structures such as the Double Tree, he said, concluding, “We end up with mismatch of cost.”
Kimmel, earlier in the meeting, asked Sheehan if alternatives could be discussed as part of the ongoing process. Those could include the $3.5 million, or a YMCA or Boys and Girls Club, or an incubator, which were all mentioned by public commenters.
Sheehan said yes.
Council member Travis Simms (D-District B) said he had always been a big supporter of the mall but the proposed changes have him “a little disturbed.”
“I am still pretty much in favor of the mall, however, I think we can’t lose sight that the LDA calls for us to have housing as part of it, that is one of the reasons why we made adjustment from … apartments to a hotel, to kind of satisfy that,” Simms said. “It seems like we are forgetting about our responsibility to the lda. I would like to see something added in there that would either have some components, whether on site orr not, be housing as part of this.”
Council member Rich Bonenfant (R-At Large) suggested that perhaps the Enterprise Zone could be scaled back.
Hennessey, defending the request to change the definition of Class A anchor, said GGP is obligated to have Class A anchors 17 years from now.
“This mall is being built not to be up for 15 years, this mall is being built to be up and be a proud part of this community for decades and decades,” Hennessey said.
Bloomingdale’s and Nordstrom have agreements with GGP that go beyond 10 years, but at some point GGP may need to replace them, he said.
“We want to be in the position where we can do that responsibly in a way that always maintains this as a class a mall. Our goal is your goal in this endeavor. We are completely aligned in our interests,” Hennessey said.
Council member Tom Livingston (D-District E) said that last week there was an article about high end malls thriving.
A Class A mall in an affluent area thrives, Hennessey said.
“We believe this is the perfect spot in America to build this facility, and when this facility is built it will a Class A mall. It will be at the top of the food chain in terms of retail facilities,” Hennessey said.
The vote on Giandurco’s amendment, to specify public hearings, had one no vote, from Kydes.
Bonenfant voted against going ahead with the process.
Council members Mike DePalma (D-District D) and Doug Hempstead (R-At Large) were absent.
Hempstead announced last week that he is recusing himself from the GGP discussions, because he is working with the company as a Stew Leonard’s executive.