Meanwhile, city officials are preparing to step in and do whatever it takes to ensure the mall anchors remain, said Michael Huber, deputy mayor for economic development.
“Keeping Carson Pirie Scott and Nordstrom and a healthy, functioning mall is of critical importance,” Huber said. “We’re fortunate with the management of Simon Property Group the mall is doing as well as it is at a time when many downtown malls are not.”
Huber said he wasn’t sure exactly when the department store deals are up for renewal, but believes it’s next year.
It isn’t clear what incentives the city might offer since Simon has not yet made a request; the city originally enticed Nordstrom to open in the $319 million mall by offering a new building and tenant improvements at no upfront cost to the retailer. How much Nordstrom pays in rent is not spelled out in publicly available documents. Carson’s occupies part of the first three floors of the former L.S. Ayres flagship department store . . .
The downtown Indianapolis mall generated a profit of $8.9 million last year on revenue of more than $23 million, records show. Occupancy held steady in 2008 and 2009 at 92.8 percent, excluding the troubled fourth floor, which is only 59-percent occupied.
Because Huber wasn't around when the original Circle Centre Mall got inked like I was, I'll clue him in on some facts before he becomes too generous in giving away our tax dollars again. Former Mayor Bill Hudnut, who had the original dream for Circle Centre Mall, inked the original deal with the Simons, which allowed them to get a brand spanky new mall with very little skin in the game and a whole lot of money being dumped into the project by the taxpayers with borrowed funds. Mayor Steve Goldsmith, who could not stand Hudnut, assumed that Hudnut had negotiated a bad deal for taxpayers and wanted to open up the books on it before he agreed to proceed with the mall's construction and remove the blight of that giant hole that existed downtown for several years. What Goldsmith learned was that Nordstroms and Parisian, the predecessor retail company to Carson Pirie Scott, paid no rent for their space and received built out allowances to lure them to the new mall. Got that? They paid no rent. I'm surprised Schouten didn't learn that little bit of information when he was preparing this story. The two stores did, however, agree to pay their share of maintenance fees. Simon relies on the lease revenues and assessments generated by all of the other retail stores, movie theater and restaurants to turn a profit for the investors.
Simon insisted on the availability of cheap parking for mall customers. It also insisted that the City construct a large parking garage across the street, which would have a connector to both the mall and the convention center, allowing people to walk back and forth without ever going outside. Goldsmith figured out the City could also generate a chunk of change if it included retail space on the first level of that garage that fronted Georgia, Illinois and Maryland Streets. After the mall was built and the Simons figured out how well the City did in renting out space to the likes of Planet Hollywood, Houlihans and Steak & Shake, it wanted to control that retail space as well. As far as I know, the City never capitulated to that demand. The Simons nixed a plan to build a connector between the mall and Union Station, which pretty much nailed the coffin shut on it.
The mall turns a profit of about $9 million a year on revenues of about $23 million according to Schouten's story. What his story doesn't mention, although Schouten has previously reported on it, the investors agreed to divert dividends in the past that they earned on their investment in the mall to pay the bond debt on Conseco Fieldhouse where the Simon's Indiana Pacers get to play rent free and keep all revenues from both game and non-game events held there. The City is currently in negotiations with the Simons to pick up $18 million in operating costs the Simons claim they can no longer afford to pay because their Pacers are losing so much money.
Now think about the timing of this story and its implications. The Simons plant a story that Nordstroms and Carson Pirie Scott may pull out of the mall as the City prepares to host the Super Bowl in 2012. If the two giant retailers actually pulled out of the mall, it would probably be the end of the mall and appear as a huge black eye for the City during the Super Bowl festivities. Of course, the Simons have lease deals with these two big retailers all over the country because it controls more mall space than any other mall owner in the country. This gives them a lot of leverage most property owners don't have and the Simons are known to use that leverage to get what it wants. The Simons also stand to lose very little if the mall fails. The taxpayers and the other mall investors will be the ones stuck holding the bag. I don't know whether Nordstroms or Parisian eventually started paying rent when their leases came up for renewal in the past, but I doubt it. What I see is a play to make the City pick up the assessments the anchors pay as well so they don't have to pay a dime for their prime retail space, sort of like the CIB picking up the maintenance costs on Conseco Fieldhouse but the Simons continuing to maintain control over it. The problem is that, as usual, there is nobody sitting at the table representing our interests. You can bet Ballard will play right into the Simons' hands just like he's doing with the Conseco Fieldhouse negotiations.