November 13, 2006
Mall overhaul | A chat with Greg Mitchell, the public face for the redevelopment of the decaying Auburn Mall
By Taylor Smith
In the middle of last month, an interesting bit of news came out of the Lewiston-Auburn retail scene. Seems the owner of the Auburn Mall ˆ George Schott, who purchased the aging retail hub for more than $14 million late last year ˆ was planning a serious renovation. In fact, according to news reports, the Auburn Mall would be the main benefactor of $25 million for work to revitalize the shopping center and surroundings.
But as those plans were announced, it became clear that a big portion of those funds would come from the city of Auburn. The city council in late October agreed to a tax increment financing deal with Schott that would refund more than $3 million in property taxes over a 15-year period. And more than $9 million in property tax paid by Schott will be dedicated to infrastructure improvements for the mall site.
So why the Auburn Mall? The once-hot retail center is now listed on DeadMalls.com, a website detailing the most obsolete and dreary of the country's many malls. And the retail trend these days seems to favor standalone big-box stores and strip malls rather than the traditional covered mall. So why dump money into an aging retail relic?
For those answers and more, Mainebiz chatted with Greg Mitchell, a consultant with Eaton Peabody in Augusta who is working closely with Schott on his retail development projects in the L-A region. Mitchell, the former economic development director for the city of Lewiston, often serves as the public voice for Schott's projects in Auburn, as the developer rarely speaks with the press. The following is an edited transcript of the conversation.
Mainebiz: Malls don't seem like the most popular form of retail development these days. So why commit millions to remaking the Auburn Mall?
Greg Mitchell: What I consider to be the retail center for Auburn is right at the intersection of Turner Street and Mt. Auburn Avenue. This is an area that the city of Auburn has been concentrating on to attract intensive retail development since the early 60s. Long-range planning has determined that's the appropriate area for that kind of investment, and the city has made decisions ˆ arguably strategic decisions ˆ about investment in public infrastructure to support that kind of intensive retail center development pattern.
How did this area get the reputation as a retail spot?
I think the population concentration of Lewiston-Auburn is termed a service center community. It's a focal point for all of western Maine in terms of the major employment and retail concentration. I mean, both Lewiston and Auburn are employment centers.
The very nature of that is you've got a combined population between L-A of around 65,000, and you've got about 100,000 people in Androscoggin County. So it's the concentration of people in L-A, with all the services that are there ˆ the two regional hospitals in Lewiston, the half-dozen schools and colleges. Lewiston's got, like, 1,200 businesses employing around 20,000 people, and you've got about 10,000-12,000 of those people that commute in and out every day. There's a hell of a draw there on the employment side, and retail becomes a natural outgrowth of that in terms of services and supporting that population.
What will the mall redevelopment focus on?
It won't be the traditional free-standing mall surrounded by a sea of parking. It'll be almost a larger version of a retail center by itself. Investment has already begun in the former Porteous space, [a former anchor in the mall with 60,000 sq. ft. of space]. George looked at decisions of how to best approach that space, whether to keep it, renovate it or tear it down and start over. The decision has been made to keep it and renovate it, so he's gone about the level of investment required to do that. In terms of that 60,000 sq. ft., it's a new roof, it's cleaning out the whole interior and getting it ready for tenancy.
Has there been any interest?
There has been interest, but as always with these kinds of centers, you've got to look for the right combination of uses, the right mix of uses. You've got to be strategic on which tenants you want to attract to the mall to kind of set the tone for the rest of the real estate.
So what kind of tenants are you looking at?
Right now, it's still the nationally recognized retailer tenants that are not presently in the market. We're talking about new uses and new retailers to the marketplace ˆ including restaurants, including possibly a hotel ˆ to create a little bit more activity out there than just retail. We want it to become more of a destination area, and not just for shopping.
How does one lure retailers to Auburn?
Initially, you get on their radar screen from a demographic perspective. The retailers need to be convinced that the market is underserved, and that they can make a profitable decision to locate there.
From my historic experience working in Lewiston, I can tell you the marketplace has grown significantly. There's over $500 million in new investment that's gone in the ground in Lewiston-Auburn in the last five years. And that is a significant figure from any community perspective in the state of Maine. And it hasn't happened by itself ˆ it's been a very deliberate approach and a very aggressive approach by the city to attract quality investment.
So all the work that's been going on in the last several years in Lewiston-Auburn is designed to basically provide for that community preparedness, so that development sites, pad sites, existing square footage and sites for new construction are ready to go. George Schott has been willing to lead in that regard, and partner with municipalities and take the risks and prepare the real estate, acquire the mall, and make the investments to prepare the real estate so that marketing and recruitment can occur. That's a tremendous amount of work to address the community preparedness part.
How much has George Schott spent on these projects?
He would not appreciate me telling you that, but it's a significant amount of money in real estate acquisitions and levels of investments.
The tax increment financing deal was narrowly approved by the Auburn city council, though some criticized the TIF as a poor use of the city's tax revenues. Why do you think the TIF is worth it for Auburn?
The Auburn Mall is about 27 years old, and it's been declining in value over a number of years. Prior ownership, in my opinion, has really run it into the ground ˆ there's a quote for you. And that can be documented. The declining values of real estate and the influence that creates on the surrounding real estate in that area of the city is not a good thing for a community.
What makes this particular situation very unique is that you have a 300,000-square-foot existing building whose value is decreasing. I would relate this project to any downtown mill-related-type project. The cost to modernize that kind of existing square footage exceeds the market parameters. To really bring it back on line in a very high-quality way really exceeds the cost parameters of what the private sector can accomplish.
We deal in the real world with market forces, and market rent kind of establishes that other threshold of what the investment level needs to be to be a reasonable return on investment in order to cause development to happen. And when that's not happening efficiently and effectively, the reverse happens. And that's happened over the last 20 years with the Auburn Mall.
Some have said that the TIF will open the door for retailers of all stripes to come into Auburn and demand the same incentives.
The other justification for this TIF is that you have a one-of-a-kind situation. There's only one mall in Lewiston-Auburn, and it's deteriorating. In my opinion, it is not setting precedent and it's not opening the door for every retailer that comes in and asks for assistance. The criteria that's been used by Lewiston-Auburn, it's a joint TIF policy. It's pretty clear; you need to prove the rationale behind your request. The rationale behind the request for the Auburn Mall was that there were public infrastructure costs that were pretty significant, totaling close to a million dollars. And then you had the unique situation of having a 300,000-square-foot building that had deteriorated to the point that the Porteous space, the roof had been leaking so long that it had created a lot of water damage in the building and created a really bad mold situation. All that needed to be cleaned up to be salvaged in order to get the building back to a point where it can be ready to be marketed to tenants.
But this is an economic development story for Auburn, right?
Municipalities generate their revenue from their land value. So you want to make sure your land value is as strong as it can be. At a minimum, it's stabilized; but ideally it's increasing. And an increasing tax base means increasing revenue, it means covering the cost of municipal services. From a revenue standpoint, it's a very good thing to strengthen your community.
I think the use of the TIF program in this case and in that particular location is kind of focusing it like a laser beam to make sure that this site, which is 47 acres in total, is increasing in value. Because it's just going to strengthen all the surrounding real estate value, which becomes one of the revenue sources in that area of the city. If you concentrate on an area like that with public infrastructure and value, it's going to show a positive return on investment. The projections that we put together and presented publicly shows the city reaping an incredible benefit over a 20-year time frame ˆ around $15 million in new revenue, and that's their share of revenue off the projected $25 million in new value that we think is a very reasonable number.
So this is a winning proposal for the city?
The return on investment to the city is to take a mall that's seen better times, reverse the trend of declining value, which stops the erosion of value of that asset and hopefully the surrounding real estate. You send it in the opposite direction and increase its value, and bring other real estate values near it. And with it you create an attractiveness that wouldn't have existed otherwise.
But as those plans were announced, it became clear that a big portion of those funds would come from the city of Auburn. The city council in late October agreed to a tax increment financing deal with Schott that would refund more than $3 million in property taxes over a 15-year period. And more than $9 million in property tax paid by Schott will be dedicated to infrastructure improvements for the mall site.
So why the Auburn Mall? The once-hot retail center is now listed on DeadMalls.com, a website detailing the most obsolete and dreary of the country's many malls. And the retail trend these days seems to favor standalone big-box stores and strip malls rather than the traditional covered mall. So why dump money into an aging retail relic?
For those answers and more, Mainebiz chatted with Greg Mitchell, a consultant with Eaton Peabody in Augusta who is working closely with Schott on his retail development projects in the L-A region. Mitchell, the former economic development director for the city of Lewiston, often serves as the public voice for Schott's projects in Auburn, as the developer rarely speaks with the press. The following is an edited transcript of the conversation.
Mainebiz: Malls don't seem like the most popular form of retail development these days. So why commit millions to remaking the Auburn Mall?
Greg Mitchell: What I consider to be the retail center for Auburn is right at the intersection of Turner Street and Mt. Auburn Avenue. This is an area that the city of Auburn has been concentrating on to attract intensive retail development since the early 60s. Long-range planning has determined that's the appropriate area for that kind of investment, and the city has made decisions ˆ arguably strategic decisions ˆ about investment in public infrastructure to support that kind of intensive retail center development pattern.
How did this area get the reputation as a retail spot?
I think the population concentration of Lewiston-Auburn is termed a service center community. It's a focal point for all of western Maine in terms of the major employment and retail concentration. I mean, both Lewiston and Auburn are employment centers.
The very nature of that is you've got a combined population between L-A of around 65,000, and you've got about 100,000 people in Androscoggin County. So it's the concentration of people in L-A, with all the services that are there ˆ the two regional hospitals in Lewiston, the half-dozen schools and colleges. Lewiston's got, like, 1,200 businesses employing around 20,000 people, and you've got about 10,000-12,000 of those people that commute in and out every day. There's a hell of a draw there on the employment side, and retail becomes a natural outgrowth of that in terms of services and supporting that population.
What will the mall redevelopment focus on?
It won't be the traditional free-standing mall surrounded by a sea of parking. It'll be almost a larger version of a retail center by itself. Investment has already begun in the former Porteous space, [a former anchor in the mall with 60,000 sq. ft. of space]. George looked at decisions of how to best approach that space, whether to keep it, renovate it or tear it down and start over. The decision has been made to keep it and renovate it, so he's gone about the level of investment required to do that. In terms of that 60,000 sq. ft., it's a new roof, it's cleaning out the whole interior and getting it ready for tenancy.
Has there been any interest?
There has been interest, but as always with these kinds of centers, you've got to look for the right combination of uses, the right mix of uses. You've got to be strategic on which tenants you want to attract to the mall to kind of set the tone for the rest of the real estate.
So what kind of tenants are you looking at?
Right now, it's still the nationally recognized retailer tenants that are not presently in the market. We're talking about new uses and new retailers to the marketplace ˆ including restaurants, including possibly a hotel ˆ to create a little bit more activity out there than just retail. We want it to become more of a destination area, and not just for shopping.
How does one lure retailers to Auburn?
Initially, you get on their radar screen from a demographic perspective. The retailers need to be convinced that the market is underserved, and that they can make a profitable decision to locate there.
From my historic experience working in Lewiston, I can tell you the marketplace has grown significantly. There's over $500 million in new investment that's gone in the ground in Lewiston-Auburn in the last five years. And that is a significant figure from any community perspective in the state of Maine. And it hasn't happened by itself ˆ it's been a very deliberate approach and a very aggressive approach by the city to attract quality investment.
So all the work that's been going on in the last several years in Lewiston-Auburn is designed to basically provide for that community preparedness, so that development sites, pad sites, existing square footage and sites for new construction are ready to go. George Schott has been willing to lead in that regard, and partner with municipalities and take the risks and prepare the real estate, acquire the mall, and make the investments to prepare the real estate so that marketing and recruitment can occur. That's a tremendous amount of work to address the community preparedness part.
How much has George Schott spent on these projects?
He would not appreciate me telling you that, but it's a significant amount of money in real estate acquisitions and levels of investments.
The tax increment financing deal was narrowly approved by the Auburn city council, though some criticized the TIF as a poor use of the city's tax revenues. Why do you think the TIF is worth it for Auburn?
The Auburn Mall is about 27 years old, and it's been declining in value over a number of years. Prior ownership, in my opinion, has really run it into the ground ˆ there's a quote for you. And that can be documented. The declining values of real estate and the influence that creates on the surrounding real estate in that area of the city is not a good thing for a community.
What makes this particular situation very unique is that you have a 300,000-square-foot existing building whose value is decreasing. I would relate this project to any downtown mill-related-type project. The cost to modernize that kind of existing square footage exceeds the market parameters. To really bring it back on line in a very high-quality way really exceeds the cost parameters of what the private sector can accomplish.
We deal in the real world with market forces, and market rent kind of establishes that other threshold of what the investment level needs to be to be a reasonable return on investment in order to cause development to happen. And when that's not happening efficiently and effectively, the reverse happens. And that's happened over the last 20 years with the Auburn Mall.
Some have said that the TIF will open the door for retailers of all stripes to come into Auburn and demand the same incentives.
The other justification for this TIF is that you have a one-of-a-kind situation. There's only one mall in Lewiston-Auburn, and it's deteriorating. In my opinion, it is not setting precedent and it's not opening the door for every retailer that comes in and asks for assistance. The criteria that's been used by Lewiston-Auburn, it's a joint TIF policy. It's pretty clear; you need to prove the rationale behind your request. The rationale behind the request for the Auburn Mall was that there were public infrastructure costs that were pretty significant, totaling close to a million dollars. And then you had the unique situation of having a 300,000-square-foot building that had deteriorated to the point that the Porteous space, the roof had been leaking so long that it had created a lot of water damage in the building and created a really bad mold situation. All that needed to be cleaned up to be salvaged in order to get the building back to a point where it can be ready to be marketed to tenants.
But this is an economic development story for Auburn, right?
Municipalities generate their revenue from their land value. So you want to make sure your land value is as strong as it can be. At a minimum, it's stabilized; but ideally it's increasing. And an increasing tax base means increasing revenue, it means covering the cost of municipal services. From a revenue standpoint, it's a very good thing to strengthen your community.
I think the use of the TIF program in this case and in that particular location is kind of focusing it like a laser beam to make sure that this site, which is 47 acres in total, is increasing in value. Because it's just going to strengthen all the surrounding real estate value, which becomes one of the revenue sources in that area of the city. If you concentrate on an area like that with public infrastructure and value, it's going to show a positive return on investment. The projections that we put together and presented publicly shows the city reaping an incredible benefit over a 20-year time frame ˆ around $15 million in new revenue, and that's their share of revenue off the projected $25 million in new value that we think is a very reasonable number.
So this is a winning proposal for the city?
The return on investment to the city is to take a mall that's seen better times, reverse the trend of declining value, which stops the erosion of value of that asset and hopefully the surrounding real estate. You send it in the opposite direction and increase its value, and bring other real estate values near it. And with it you create an attractiveness that wouldn't have existed otherwise.
Most Recent
Most Recent
Comments