Paula Gardner: Latest blow for Georgetown Mall sets redevelopment back further
What's a developer to do with an aging neighborhood shopping center in Ann Arbor?
The answer for Georgetown Mall right now - and for years to come - will be "nothing."
News on Thursday that Kroger Co. plans to shutter its store there is the final death-blow for the center which, since 2001, has traveled from acquisition to overpriced development opportunity to redevelopment vision that didn't quite fit the neighborhood.
News that the center had entered foreclosure in 2008 put the brakes on all of that trajectory, just before the financial market implosion assured Ann Arbor that no one would be eligible to finance a viable project on the property.
Now the remaining piece of retail vitality in the center will close by Sept. 12, leaving even less likelihood that this southeast neighborhood will get to shop there anytime soon.
The issues of what went wrong started playing out as far back as 2004.
Craig Schubiner and his company, The Harbor Cos., purchased the 6.57-acre site for $6.125 million in 2001. At that time, Schubiner also was active in planning a $2 billion development in Pontiac called Bloomfield Park - which involved an annexation, a court battle and a protracted construction timetable thanks to financial issues, including a court battle with a financing partner.
Meanwhile, Ann Arbor turned into one of the hottest development areas in Michigan, with local and out-of-state companies battling for property that could be redeveloped. Proximity to campus, high-paying retail tenants and a mixed-use residential component made any project a 'win' in many developers' minds.
But there Georgetown sat, with the owner missing a tax payment as far back as winter 2004.
It's around the time of that missed tax payment that Harbor listed the property for sale, asking over $8 million. And that's when local real estate experts started to point to the property as one that was bound for trouble.
The financial aspects - even including the long-term Kroger lease, which expires in 2012 - just wouldn't align for anyone to bite at the asking price and the redevelopment costs.
Schubiner took a couple of runs at plans to redevelop the property himself. But even then, some in town questioned what kind of capital he could commit to the project, given the uncertainty of Bloomfield Park and the late tax payments.
And then the foreclosure filing in 2008 showed that mortgage debt on the property had spired upwards of $15 million.
Georgetown Mall is not a primary location, thanks to its position as a neighborhood center without high visibility from the city's most-traveled roads. And its topography makes redevelopment challenging.
Still, it's had many advocates over time - including neighbors, many of whom are used to being able to walk to the grocery. And it had its place in the city's retail landscape, offering the mix of national stores - like Kroger and RiteAid - with a home for smaller, independent businesses that built loyal clientele.
All of that ended when the "pending" redevelopment forced small businesses to leave, and RiteAid moved to a high-traffic corner at Packard and Platt.
Retaining Kroger in that location may never have happened. There are other stores nearby, and grocery siting needs keep evolving into bigger footprints - yet, on the other hand, there's some growing movement toward smaller stores, too.
Either way, there's a place for neighborhood centers with independent retailers and, depending on how they're designed, nearby residential units.
Fitting something suitable for both the neighborhood and the marketplace into the Georgetown Mall could happen, with some vision (and financing).
Yet the numbers behind this property, as they stand now - and as the economic climate stands today - mean it will be one long wait before Ann Arbor will see something besides the empty buildings on that property. Even the assessed value has plummeted to $1.3 million under the 2001 purchase price. And the bank is looking at a double-digit "haircut" on the outstanding balance even in the best-case scenario.
All of which means that Ann Arbor can look at this property as an example of how the development frenzy earlier in this decade not only didn't do the riskier investors any favors - but it's hurt the neighborhoods, too.
Paula Gardner is editor of Ann Arbor Business Review on AnnArbor.com.
Comments
John Galt
Sun, Aug 9, 2009 : 12:16 p.m.
The economics look very bad on the location. If the assessed value was $1.3 million (in 2001-can't be higher these days) and, as I remember reading, there is about $600,000 of back property taxes overdue....then who would pay more than $700,000 for the property? And an interesting question comes to mind: What bank provided a mortgage (or refinancing) totaling $15 million on a property with an assessed value of $1.3 million and a purchase price of $6.125 Million? No wonder the financial system is a mess...
Bob Dively
Sat, Aug 8, 2009 : 8:50 p.m.
"Other stores nearby" refers to other grocery stores in the general area (e.g., the Stadium & S Industrial Kroger), not to other stores in the Georgetown Mall.
Wystan
Sat, Aug 8, 2009 : 12:01 p.m.
The Kroger on South Industrial started out as an A&P supermarket. Kroger doubled its size after they took it over -- but as a supermarket, it is older than the Kroger at Georgetown Mall. I too remember a very nice Chinese restaurant at Georgetown Mall, back in the day when Ann Arbor had only a handful of places offering Asian cuisine -- a situation amazing to contemplate in these later days!
Ann English
Fri, Aug 7, 2009 : 8:07 p.m.
"Other stores nearby"? What other stores nearby? The last time I drove past that Kroger store, I didn't look over at it at all, only thinking of which direction I would take as I approached Stone School Road and Packard. That Kroger has been there longer than the South Industrial location. I had thought they were too close together, but never expected one to meet its end like this. Over twenty years ago, I visited a Chinese restaurant in that mall, where I was introduced to spring rolls, which I discovered I liked.
bellhelmet
Fri, Aug 7, 2009 : 1:24 p.m.
I drove by there today and the first thing I noticed were weeds growing through the rocks on the extension. I thought uh oh, this isn't good and then looked down and saw about 10 cars parked in front of Kroger. The rest of the parking lot was empty. It's going to go downhill quick now.