Updated, 6:50 p.m., a graphic and GGP handouts added.
NORWALK, Conn. — Flexibility is key in the changing retail business, GGP Senior Developer Doug Adams said Monday, in defending a proposed change to the language for The SoNo Collection.
Common Council members, asked to begin the process of excising the hotel planned for the proposed mall, zeroed in on what Adams called a “clarification” of high end anchor.
Harold Cobin video of entire meeting at end of story
“You also felt a need to modify mall classification,” Council Finance Committee Chairman Bruce Kimmel (D-At Large) said to Adams. “That bothers me. Why did you feel that need?
It’s like you put an out in there in case the high-end retail… sooner or later, is also infeasible.”
“We look at it as more of a clarification of what is there,” Adams said. “We are building this asset for decades. We plan to own it, and certainly whether we own it or not, we hope it is around for 40-50-60 years. So, we are looking to the future. It’s no secret that our industry continues to evolve or change.”
The Council Planning Committee voted unanimously to move the issue to the full Council – but the issue is simply to begin the process of modifying the Land Disposition Agreement (LDA) for the West Avenue property, formerly referred to as “95/7,” to remove the hotel/office/residential component. The Council will vote again on whether to approve the changes, and the Redevelopment Agency will also vote. Then the change will make its way through Zoning.
“It’s not the end of this discussion it’s nearly the beginning of it and getting the documents in line, if the Council is inclined to do so,” Redevelopment Agency Executive Director Tim Sheehan said.
The discussion will not include Council member Doug Hempstead (R-At Large), who recused
Himself, saying that, as a Stew Leonard’s vice president, he is in negotiations with GGP on a project outside of the city and “in another region.”
GGP came to the city around Christmas to announce that it had found hotel, office and residential space to be infeasible, triggering four months of discussion, Sheehan said.
GGP had worked diligently to design its hotel, down to selecting finishes and planning verticle transportation, but the profitability doesn’t add up, Adams said.
F.D. Rich Co. recently began construction on a Residence by Marriott Inn next to the Norwalk Police headquarters.
“It’s always been recognized that direct competition, whoever got in ground first was going to capture the market,” Sheehan said.
The projected cost of building hotel had gone from $50 million to $56 million, Adams said, calling that “exorbitant.” A third-party consultant projected a 4.4 percent rate of return, half of what is needed.
Office space would get a 4.29 percent return and residential would get a 3.3 percent return, he said.
“I think that’s the theme in general. This building costs twice as much as what the market will support for those uses,” Adams said.
Nevertheless, GGP would like to begin construction by May 1, excavating the mall according to its existing planned footprint, Attorney William Hennessey said.
“Mobilizing a big crew takes time,” Hennessey said.
The city’s process to approve the changes would take until June 1, Sheehan said.
GGP is looking to meet its obligations to Bloomingdale’s and Nordstrom, and open in October 2019, Adams said.
“We can start that with the understanding that the final approvals are yet to come,” Adams said. “But if we wait for that, we have a timing issue that we cannot solve. So we need to start, and we are willing to start. Obviously, if it’s not approved everything is going to stop and that will be that.”
GGP volunteered to compensate the city $3.5 million for the loss of the hotel, with the aim that the money go to improving the neighborhood in some way, Hennessey said.
The loss of the hotel decreases the tax payments to the city about $200,000 a year, Adams said. It means 105 less jobs.
Council member Tom Livingston (D-District E) asked Attorney Eric Bernheim what would happen if the city refused to approve GGP’s request.
There would be mediation and arbitration, and then it could go to court, Bernheim said.
“I believe you’ll tie up the property for many, many years,” he said.
The issue for Council members was the proposed change to the mall classification, which excises a definition of high-end department stores as “Bloomindale’s, Nordstrom’s, Saks Fifth Avenue, Neiman Marcus, Lord & Taylor, Macy’s and Von Maur” and changes it to “high-end entertainment concepts, high-end fitness centers, high-end or specialty grocers and high-end furniture stores” for at least 15 years.
“There’s a lot of changes in our industry. We do, in fact, have grocers in our Class A malls,” Adams said.
Livingston asked if high-end entertainment could be a movie theater, and Adams said yes.
“In theory, if one of our anchors came to us, and said, ‘We can’t move forward,’ then we would have to move forward to replace them,” Adams said.
“The city would have to approve that that is an anchor of high quality. If there is disagreement then there would be a process,” Sheehan said.
“Now, we are going from Bloomingdale’s and Nordstroms to Dave & Busters and an Alley Fitness?” Council member Shannon O’Toole Giandurco (R-District D) asked. “…The definitions are not defined like they were before and it seems like we are opening ourselves up to a lot of changes.”
Bloomingdales and Nordstrom are committed, Adams said.
GGP is obligated to have a Class A mall for 10 years, and high end anchors for 15 years, he said. The company is motivated “just from a business point of view” to have the best possible anchors, he said.
“I can’t tell you what it is because some of the concepts that exist that are in anchor positions didn’t exist 10 years ago,” Adams said. “There are department stores that existed 10 years ago that don’t exist today. So, the industry is changing at an ever-increasing rate.”
Adams was forced to defend the Class A mall business.
“Our properties are thriving,” he said. “…We really like our business. We understand the turmoil in retail… a lot of it is obsolete.”
The Internet is making the better retailers stronger, he said, and, “When you are in the right place and you’ve got the right mix and demographics, it’s an added benefit.”