A redevelopment agreement aimed at transforming the Regency Mall property in Racine gained final approval from alderman this week, but not without a big increase in the amount of tax incremental financing (TIF) incentives possible for the mall’s owner and redeveloper Hull Property Group.
When the redevelopment project was first considered in September of last year, the proposal called for the developer to receive $22 million in increment over the life of the new TIF district, which was then expected to sunset in 2043, or within 21 years.
Under the new redevelopment plan, Hull would receive 90% of all increment generated by the TIF district over the next 27 years or through 2050, whichever is sooner, up to a maximum of $39.4 million.
That represents a $17.4 million increase.
Created late last year, the TIF district encompasses 138 acres at the southwestern edge of the city in an area roughly bounded by South Green Bay Road, Durand Avenue, Roosevelt Avenue and 21st
Street. The Regency Mall property owned by Hull is 62 acres – consisting of the existing 810,337-square-foot mall structure itself, and its surrounding parking and outlots.
Under the redevelopment plan, Hull would work as a master developer, paying up front to raze 400,000-square feet of the Regency Mall – the now vacant Burlington and Boston store anchors and everything in between. It would maintain ownership of the remaining mall building and surrounding parking lots and would move tenants from the east end of the mall that was razed to the west end.
While maintaining ownership of the remaining 26 acres, Hull would market the remaining 36 acres, using increment to fund incentives that could help lure developers and retailers to the site, and ease, at least at the outset, the cost of construction.
Betting on Racine
Addressing aldermen this week, John Mulherin, vice president for Government Relations at Hull Property Group, said his company was already working with a major retailer that was interested in acquiring the first development site on the property.
The second phase of the project calls for Hull to sell another site near the downsized mall to an apartment developer that would construct a 280-unit apartment complex. The final phase includes plans for five restaurants on surrounding out lots, as well as a retail out parcel.
“We will re-develop what’s left of the mall (after the demolition). The major retailer will be responsible for its vertical construction, and the apartment developer will be responsible for its vertical construction,” Mulherin said. “You are not going to see the pretty pictures and the final product. That is going to be the end use – the end developer if you will. What we are here to do is eliminate the blight so we can create that opportunity.”
In the project plan approved in September, Augusta, Georgia-based Hull, planned to spend $4.97 million on demolition work, $4.2 million for structural rework and interior renovations, $6.5 million on other sitework, and $5 million on costs associated with tenant relocation, buildout assistance, and other costs, up front, with the expectation that over time they will be paid back with increment generated by increased value of land and the increment it generates.
“All the risk is on us. If we don’t perform, we’ve lost a lot of money,” Mulherin said of the deal.
A problem everywhere
Hull Property Group purchased Regency Mall in December 2016 for $9.6 million as part of a three-property acquisition. The company specializes in buying struggling mall properties, stabilizing them, transforming them, and then repositioning them.
Despite investing about $4 million into the mall over the following two years, the property was beset by challenges, Mulherin told aldermen, among them the bankruptcy of the Boston Store parent company, which led to closure of the ailing mall’s only anchor tenant at the time, and then later, a mass exodus of tenants. Today the mall is about 67% vacant.
Considering the situation, Mulherin said Hull could do one of two things – continue to let the mall further deteriorate or try something bold.
“Current valuation (for Regency Mall) is $9.1 million, on a rocket ship down to $5 million because it is failing,” he said. "This is a problem that is all across the country. It’s not just Racine. The department store was the mall. There is no such thing as the department store anymore.”