In a sour economy, should you bet on Cloverleaf Mall?
It's not so far-fetched, really, when you consider that the dead mall has a giant 120,000-square-foot Kroger anchoring its redevelopment — grocery stores are generally doing well in this recession, particularly Kroger. Plus, Chesterfield County already bought the land and buildings for a little more than $16 million.
The mall's rebirth has been pushed back because of the difficulty signing up all the tenants that aren't Kroger. Tom Jacobson, director of community development for the county, initially expected construction to begin this fall, but says the economy delayed those plans a bit.
“I think you know that development is very difficult in our current economic times, however they are still moving forward and continuing to work with other retailers on the site,” he says of Charlotte, N.C.-based Crosland, the project's developer. “Kroger is still very committed to wanting to build their store at that location.”
Key to Cloverleaf's revival (sort of, the mall is being torn down and replaced with a mix of retail shops, housing and commercial offices) is the floating of about $16 million in bonds to pay for $11.3 million in road and other public infrastructure improvements. Public bond guru Ken Powell, the architect behind the Broad Street Community Development Authority, was hired earlier this year to get the bonds to market. He says it likely will be the first of the year before the markets are healthy enough to attract investors.
“I think we are probably talking early next year,” says Powell, managing director at Stone & Youngberg in Richmond, which specializes in public financing. “The market is slowly moving back toward us.”
The $16 million Cloverleaf authority is instrumental in making the project work. Once the bonds are floated, Crosland plans to reimburse the county for nearly $17 million it spent acquiring the property, Jacobson says. The bonds will be paid back primarily with real estate and sales taxes. Once the development is complete, the land will be worth millions more, and instead of the spike in real estate taxes going to county coffers, that money will be diverted to pay off the bonds.
Chesterfield has “scaled the project to not make it so outrageous,” Powell says. For example the Broad Street authority included $66.7 million in improvements. Plans for the overly ambitious ballpark bonds in Shockoe Bottom — now deader than Cloverleaf — would have been upward of $70 million.
The other big difference is Kroger, about as stable an anchor tenant available in a recession. “That is a significant part of the transaction,” Powell says. “Grocery-store-anchored shopping malls — they are doing very well in this recession.”