The $85 million redevelopment of the Oak Ridge Mall received a key endorsement Thursday when a city board unanimously recommended a plan that would allow new property tax revenues generated at the site to be used to help pay for development costs.
It’s known as a tax increment financing, or TIF, agreement, and it could be worth $13 million and last 20 years. In an 8-0 vote during a special meeting Thursday, the Oak Ridge Industrial Development Board recommended the plan to the Oak Ridge City Council and Anderson County Commission, which could consider it in November.
Tim Sittema, a partner in Crosland Southeast, the North Carolina company that has had a purchase contract on the mall since January, said the commercial real estate firm doesn’t have signed leases for the proposed redevelopment yet but is focused on 20 or 30 larger potential tenants.
If all goes well, the sale of the mall could close in the middle of next year, and demolition could then start immediately and last three to four months. Construction could last about 1.5 years, Sittema told the IDB. That means the redeveloped property, which would be named Freedom Park, could open in 2016.
Sittema declined to discuss the potential purchase price.
The 59-acre redevelopment in the center of the city would convert what is now a mostly empty enclosed mall—where redevelopment plans have languished for more than a decade—into an open-air, retail-driven, mixed-use property. It could include 400,000 square feet of retail space and roughly 60,000 to 100,000 square feet of office space, a hotel of about 100 to 120 rooms, and up to 50 multi-family, “walkable” residential units. It could also include three to four restaurants.
The developer would be C4 Investments LLC of North Carolina. Partners of Crosland Southeast are members of C4.
Sittema said Belk and JCPenney, the mall’s two remaining anchor stores, have to sign off on certain aspects of the deal. So do Walmart and Tinseltown. But a general increase in sales at the site could help the anchor stores, Sittema said.
It could also help other businesses in Oak Ridge.
“Typically a project like this is very catalytic,” Sittema said. “This will, generally speaking, raise the tide.”
He said Crosland Southeast has ongoing discussions with Belk, JCPenney, Walmart, and Tinseltown. The mall purchase itself would not include Walmart, Tinseltown, or the Staples business complex, but it would include the Belk and JCPenney buildings.
Projections presented during a half-hour public hearing before the IDB’s special meeting on Thursday said the redevelopment could create 950 to 1,000 new jobs, and increase city and county sales tax revenues by about $2.16 million.
The TIF would not create any risk for the city, county, or IDB, Oak Ridge economic development consultant Ray Evans said. It’s what is known as a non-recourse loan. The $13 million TIF loan would be repaid by the new property taxes, and the bank’s only recourse would be to the increment—the increase in tax revenues. The developer has to guarantee the TIF loan and would be liable for any deficiencies, said James L. Murphy, a Nashville attorney with Bradley, Arant, Boult, and Cummings.
Murphy said the TIF still has to be approved by the Tennessee comptroller and commissioner of economic and community development. Loan documents would come back to the IDB, he said.
“This is just one step,” Murphy said of Thursday’s recommendation to approve the tax increment financing.
Site demolition would have to start within 30 months.
Oak Ridge has used a TIF before, though on a much smaller scale, to help developers build Panera Bread, Aubrey’s, and Aldi on South Illinois Avenue.
Sittema said the mall TIF is one big part of the pre-development process. Another is marketing.
“We can’t develop the project unless we have enough tenant demand,” he said. “Our key effort right now is to try to sign up those retailers that we have targeted.”
That could take most of the next six months, he said.
“Financing will be available if we get the lease revenue realized,” Sittema said. “That’s what the lenders will use to underwrite a project like this.”
IDB Chair David Wilson asked if there was anything that would stop the project.
“If we can’t attract enough retailers, then we can’t start the project,” Sittema said. “That’s what keeps me up at night.”
But he said he was optimistic.
“No one’s going to work harder than we are,” Sittema said. “We’ve had a lot of very good conversations. We’re not quite at that tipping point, but we hope to be there soon.”
Sittema said the Oak Ridge mall site is the “heart and soul” of this city of about 28,000, and there are roughly 100,000 people in the trade area. The hospital (Methodist Medical Center) and other regional attractions prove there is a larger shopping area, Sittema said. And the new Kroger Marketplace shopping center at the intersection of Oak Ridge Turnpike and Illinois Avenue, that company’s fifth location here, helps Crosland Southest makes its case to potential retailers that Oak Ridge is a good long-term investment.
Sittema said Crosland Southeast is currently doing three similar projects that involve “dead malls,” and all three require TIFs. Besides the Oak Ridge Mall, the other two are in Virginia, where the project is almost complete, and Nashville.
Oak Ridge residents who have seen Crosland Southeast’s developments at Biltmore Park in Asheville, N.C., and Providence Marketplace in Mt. Juliet, Tenn., have praised the company’s work there.
Officials elaborate on new revenues, property values
Mall redevelopment plans have languished since 2002, when Oak Ridge voters rejected a controversial $23.2 million bond resolution that would have supported a plan to convert the mall into a town square that would have included new school administration headquarters and a senior citizens center.
The current enclosed mall replaced the former Downtown Shopping Center in the 1990s, and Chattanooga businessman Steve Arnsdorff bought the property for $6 million in 2003. City officials said it had once been appraised at about $60 million or more.
Evans said Oak Ridge could receive about $1 million of the $2.16 million in new sales tax revenues at the redeveloped site. Anderson County Schools would get roughly $700,000 each year, and Oak Ridge Schools could collect close to $375,000.
The current property taxes on the property are now roughly $111,000 per year, split roughly 50 percent between the city and county. The city and county would continue to collect that, as well as 14.7 percent of the new property tax revenues, Evans said.
He said a conservative estimate of the mall property, once everything is built, including 27 buildings and parcels, is about $50 million. The mall is now appraised at roughly $5.9 million.
Read the resolution recommended by IDB and the economic impact plan here: Oak Ridge Mall Resolution and Economic Impact Plan.
Note: This story was last updated at 6:50 a.m. Oct. 25.