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GGP’s hotel-less mall hitting ‘homestretch’

GGP is looking for Norwalk to approve a plan for The SoNo Collection to be built without a hotel.

Correction, 7:31 p.m.: GGP originally said construction would begin in 2015. 

NORWALK, Conn. – Norwalk could be figuring out a correct economic metric to value to its loss of a hotel right off Interstate 95, Deb Goldstein said.

GGP really could walk and abandon its site if the numbers don’t work, Common Council member Michael Corsello (D-At Large) said, in response to one of Goldstein’s letters.

These opposing ideas collide Tuesday as the Council takes on the proposal to allow GGP to build The SoNo Collection without a hotel as a mixed-use component, as an action item with a probable vote. The deal, as negotiated, includes a $3.5 million payment to the city and a change to the definition of “Class A anchor,” diversifying it beyond a Nordstrom or Bloomingdale’s, though both are said to have 20-year leases with options for 60 years beyond that.

The Redevelopment Agency will then pick up the ball, with two public hearings – both scheduled for 7 p.m. Wednesday.

GGP has said it was struggling to get a hotel operator for its project, and the death knell really came when F.D. Rich began construction of a hotel on South Main Street.

Some say that the city should get more than $3.5 million from GGP. Others say take the money, make sure it goes to a good cause and get the mall built.

“We’re going to get $9.7 million,” Council member Eloisa Melendez (D-District A) said Monday as she left the Democratic caucus – a joke.

“Stay tuned,” Council President John Igneri (D-District E) said, declining to comment further.

Although many connect the proposed $3.5 million to lost property taxes, that was not in the original press release that announced the deal.

“The $3.5 million that the city would receive if the council approves this item tomorrow night was based on many different factors, including the lost tax revenue from the hotel,” Majority Leader John Kydes (D-District C) said in an email.

The Council’s big vote comes a scant six weeks after the mayor’s office announced that the city and the Redevelopment Agency had reached an agreement with GGP, as described above. “Agreement” may not have been the right word, as both the Common Council and the Redevelopment Agency have to approve the deal. But there’s a rush – GGP’s contracts with its anchors call for an October 2019 opening, and the company is seeking accelerated approvals to meet its deadline.

“It’s a very aggressive modification schedule that the city and the mayor’s office have been pushing to try to accommodate (GGP),” Attorney Eric Bernheim, special counsel to the city, said recently to the Zoning Commission.

Redevelopment will have its hearings on May 23 and then vote on May 30, he said. The Zoning Commission will have a public hearing on June 8, he said.

Norwalk is in “the homestretch of an irreversible decision to alter the LDA (Land Disposition Agreement) and the URP (Urban Renewal Plan) for the Reed Putnam sites solely for the purpose of maximizing the benefit of the project for GGP, without due consideration for maximizing the value of the project for the benefit of the residents, businesses and public resources of the City of Norwalk,” Goldstein, a Third Taxing District Commissioner, said in her latest email to the Council and Redevelopment.

The packet for Wednesday’s Redevelopment Agency meeting offers other views.

“I am generally in support of the mall,” Brad Hall wrote. “I know many Norwalk residents that will shop in the high end retail establishments. I am also not overly concerned with the lack of a hotel. I would rather we have one thriving hotel than two floundering.”

News reports say that discount- and high-end malls are thriving, Hall said.

“If GGP is willing to invest their money, they must believe in the location,” Hall wrote. “I do worry about the mall going dark in 10 or 15 years however.  Last year I attended a downtown revitalization program in NJ and heard about towns requiring bonds for such an event.  Should the mall go dark, the city pulls the bond in order to get the funds to take the mall down.  I strongly urge you to require the developer to get such a bond.  With the bond, Norwalk will be covered for the downside risk of having an empty structured attractive to vagrants. An empty lot would be better than an empty structure.”

Stephanie Pelletier, a Bridgeport resident who is a marketing consultant to SoNo businesses, called the mall “a big idea and the right idea for Norwalk, Fairfield County and the region.”

“Take the train on any given weekend. Guess where people are going? To NYC to go shopping!” she wrote. “… The marketing muscle that GGP will bring to the Collection will be unrivaled from any other asset: social media, website, community engagement, pr, advertising and promotion are the marketing tools that GGP will bring to bear. The ‘Sound of Norwalk’ needs to be the sound of cash registers ringing up merchandise along with happy people ‘making happy sounds’ of satisfaction.”

Plus, she wrote, “The $3.5 million payment to the City in lieu of the hotel is a boon that other cities only dream about. Stewardship of this fund will ensure that the greatest good benefits the most people. This is a good, if not great thing. The other great thing is that this project is a class act with class act tenants. Allowing GGP to clarify the intended flexibility in the definition of ‘anchors of high quality’ demonstrates that the City of Norwalk and GGP can successfully partner in this project through mutual understanding and consideration of proactive and diligent project management so no one Is caught by surprise years down the road.”

There’s also an anonymous letter in the packet, from “A Concerned Norwalk Citizen,” who said, “It has been written about, reported on and blogged all over that malls are quickly becoming a thing of the past, so why in God’s name would Norwalk choose to build something that will obsolete in a couple of years?   I just can’t wrap my head around it.”

Goldstein urged the Council members to bring their own proposals to the table, “based upon real value that is being lost/gained by changes.”

One possibility would be:

“The difference between the estimated gross assessed value of the mall in its first (and most valuable year) and the full assessed value of all of the taxable property that stood on that site before eminent domain, in today’s dollars, with reasonable inflation escalations over the last 25 years. This is more that reasonable, because GGP is getting the full market value of property that the City paid (in time, administration, and acquisition costs) for when they thought they would get a mixed use result on the land, in keeping with its own planning, and its own Redevelopment plan.”

GGP initially predicted it would begin construction on The SoNo Collection in mid- to late-2015, and Goldstein said this means Norwalk has already lost $4.7 million in tax revenues, basing that on GGP’s analysis.

“GGP argues that this delay is a result of various permit requests taking more time, but I have been present at some of these presentations to zoning and they were triggered by changes to the design that was agreed upon (for example, a special process permitting moving, digital signage on the exterior, which was specifically NOT included in any of the design proposals). These are options that GGP chose to pursue on its own, not delays imposed by the city,” Goldstein wrote.

Then there’s the time spent by volunteers and staff members in approving GGP’s original proposal, in an expedited fashion,” Goldstein said.

“If GGP had come at the outset and proposed a mostly retail, plus some non-retail commercial on the site, we might have turned it down flat and used all of those hours and resources on something that is having an equal impact on the City – the Walk Bridge,” Goldstein wrote.

Corsello responded to one of her earlier letters, saying:

“Unfortunately, we are negotiating with an entity who up until now has only invested a fraction of the $400+million that this project will cost them. The possibility of GGP abandoning the entire project is therefore realistic if the ‘numbers don’t work’. As we are aware of the property’s 20 year history of having no development offers which even approached the financial ‘upside’ of the mall one must seriously question whether we want to risk losing it. Certainly, once GOP expends more substantial revenues in the project the leverage in negotiations will shift dramatically.”

12 comments

Sue Haynie May 23, 2017 at 6:14 am

Could of, would of, should of, we need to get past that. Approve this, build the mall.

Bob Welsh May 23, 2017 at 7:56 am

GGP rep Doug Adams told me in a recent phone conversation that building the hotel as originally agreed would reduce the project’s total value by $21 million.

Under the proposed deal, GGP pays Norwalk $3.5 million for a concession worth $21 million.

Is this a balanced deal, or should Norwalk receive more of the $21 million?

Joe S May 23, 2017 at 8:04 am

A failing hotel would be worse – GGP is right to cut it out of the plan. It is easier to repurpose retail space than it is habitational, so why would they bear the expense of building something they know would fail. Delays cost money and no one wins. It is time to move away from principle and towards the practical – this is the best option Norwalk has for the site.

DB May 23, 2017 at 9:38 am

What bothers me the most about the mall development is that GGP is not building what the original LDA required. Tax abatements were provided for a developer specifically to incent them to build what Norwalk wanted on the site. Not what GGP wanted. Now that a mall will be built there not a mixed use development, Norwalk should be paid not only for lost taxes on the hotel, but tax abatements should be reduced if not eliminated. Right now we have given the leverage to GGP, we need to take it back.

Donna May 23, 2017 at 10:13 am

No one should be comfortable with any single dollar amount given in compensation for the loss of the hotel. As reported above, Brad Hall suggested the project be bonded to protect Norwalk in the event the mall fails in 10 years. Nationally recognized zoning expert and economist Bill Fischel of Dartmouth has long advocated insuring property owners against the potential negative impact on property values of unwanted uses. This might be such an occasion. The SoNo Collection could revitalize the struggling SoNo area. Or it could crush it. Some of the potential losses are impossible to quantify or predict. And no one knows how the 3.5 million will be allocated. This money, if spread around, will amount to very little, especially if given away to local contractors who know how to make a quick buck off City contracts. Some of those contractors already owe back taxes (Grasso).

The ball is in our court to negotiate a better deal for Norwalk. I hope the CC rises to the occasion.

Stephen May 23, 2017 at 12:03 pm

Take into consideration the number of retail businesses closing their doors and moving away from that type of operation. Take into consideration the growth of such firms as Amazon whereby customers can purchase and have delivered to their doorstep almost any product they want…at reasonable prices. Take into consideration the aggravation, and the cost of driving to and parking where the likelihood of damage to one’s car is high. Planning for and building such a mall, and seeing it succeed, is a plan in futility. How long after it is built will it become unoccupied? Take into consideration what is occurring now in other malls in the region, if not the entire country. It’s time to rethink what purpose this mall will serve Norwalk as technology and customer service oriented businesses evolve further and further away from retail operations.

Adolph Neaderland May 23, 2017 at 2:19 pm

Build anything regardless of the facts? Doesn’t appear to be a sound alternative.

Norwalk is dealing with real-estate “professionals” who apparently made a miscalculated error and are not now willing to cope with the consequences and are low-balling a settlement, and redefining the scope of the deal.

Using the lost hotel tax base for compensation does not consider the loss of potential SONO business, or loss of Maritime Aquarium business (as examples of the ancillary revenue flow) over the same 10 years.

That sum, if properly estimated, I believe would dwarf the current offer.

We need our own “professionals” .

Adolph Neaderland

Debora Goldstein May 23, 2017 at 4:49 pm

Please correct the following sentence to reflect 2017:

GGP initially predicted it would open The SoNo Collection in late 2015.

What I wrote was:

– The loss of economic value to the city from a one year delay in opening date, as originally forecast in 2017 (and leveraged by GGP to get the counsel to execute the agreement) and the new opening date in 2018.

Ed May 23, 2017 at 5:28 pm

I’m still questioning the economics of building a mall in 2017. It seems that no one has built an enclosed mall in the U.S. since 2006. Plus, we already have several malls within a half hour driving distance from Norwalk.

In addition, it looks like the trend these days is to create open air shopping centers. Armonk Square in Armonk, NY is a good example of this. Something similar would complement SoNo’s North Main St/Washington St shopping, dining, and residential area. A massive traditional mall seems out of place in this neighborhood.

Nancy Chapman May 23, 2017 at 7:32 pm

You are correct that I made an error but you are mistaken in what error is was. I meant to say that GGP had predicted construction would begin in 2015. That sentence is not attributed to you, it was my reporting not your commentary.

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