Home » Politics/Policy »St. Louis County »Suburban Sprawl » Currently Reading:

Placing Your Eggs In One Heavily Leveraged Basket

August 18, 2006 Politics/Policy, St. Louis County, Suburban Sprawl 9 Comments

St. Louis Mills mall in St. Louis County had big promises for the City of Hazelwood a few years ago (full story):

In the past, retail establishments have not been a major part of Hazelwood’s economy. But that’s about to change in a big way. Mall developer Mills Corp. recently broke ground for a $250 million shopping center dubbed St. Louis Mills. The 1.2 million-square-foot mall will include 12 anchor stores. Hazelwood city leaders approved $18.7 million in tax increment financing for the project.

The mall, being constructed on part of a Missouri River floodplain, will be anchored by high-end outlet stores, led by the St. Louis area’s first OFF 5th—the outlet version of Saks Fifth Avenue.

Rebecca Zoll, executive director of North County Inc., sees the Mills development as an epic event for the region, perhaps permanently changing its economic make-up and the perceptions of outsiders.

“This will bring in people from around the Midwest, and their dollars will go back into our community,” Zoll says. “There’s been some concern about how the mall will affect local business, but I think it will only help.”

First, I do believe that a mall can change “perceptions of outsiders” but certainly not in the positive. If a mall is an “epic event” the region is worse off than I previously thought. Maybe if you live in Wentzville the idea of getting in the minivan and driving in bumper to bumper traffic on the interstate to shop in generic stores around a food court this is a cool thing.

Aside from the many issues I have with indoor malls and building on a flood plain, a big concern is the financial health of the companies on which municipalities are so dependent. These great saviors of local economies are often teetering on the edge of bankruptcy.

The St. Louis Business Journal is reporting Mills Co, owner of St. Louis Mills, has fired its President. They appear to have a few issues to work out besides getting a new executive:

Mills said Aug. 11 that it would sell its stakes in three shopping centers based outside the U.S. to a Canadian real estate firm for $981 million to help pay off debt.

The company said that Ernst & Young audit reports for 2005 are likely to contain a paragraph saying “there is substantial doubt” about Mill’s ability to continue as a going concern because of deadlines for repaying $2 billion in debt.

Mills is restating its financial reports for the years 2000 through 2005 because of accounting errors, and those errors are expected to reduce net income by $210 million for 2003, 2004 and the first nine months of last year, according to a recent regulatory filing.

St. Louis Mills is among 42 properties owned by Mills Corp.

Hazelwood gave a $18.7 million TIF to a company that is now $2 billion in debt and possibly about to default. Wow, two billion. So creditors will likely take over St. Louis Mills and they will try to sell it. Just a guess but I’m betting it will sell for less than its original $250 million price tag. As long as the registers keep ringing Hazelwood should OK. If stores get a sense things will not be fine with new owners you might see some abandon ship.

Hazelwood is not alone, from a recent Post-Dispatch article:

Now Rock Hill is struggling to survive financially while banking its future on an expansive Novus development at the corner of Manchester and McKnight roads.

Local developer Novus, you may recall, was supposed to do a massive project in Sunset Hills but ran into financing issues for the project last year. From the St. Louis Business Journal:

It’s been about a year since Novus Cos.’ planned $184 million Sunset Hills lifestyle center deal fell apart. City officials and property owners within the development area are working to move on, but Novus’ Jonathan Browne apparently is not.

Browne, president of Novus, made a plea to Sunset Hills’ new mayor, John Hunzeker, June 26 to resurrect the project that has become a poster child for eminent domain reform across the country. In attendance at the one-hour meeting in the mayor’s office were Browne, Hunzeker and City Clerk Laura Rider.

All this to fight over a relatively fixed amount of sales tax revenue. The Sunset Hills project would have relocated a Famous-Barr store from Crestwood Mall (in Crestwood) to Sunset Hills. Good for one municipality but bad for the adjacent community. Some will argue the construction creates jobs but where does that money come from? The overall sales taxes collected in the region are the same yet $184 million would have been spent to get there. Well, this money comes in the form of reduced property values from other commercial properties that used to collect this sales tax, debt carried by the developer and tax incentives. At some point we must realize we cannot keep spending billions of dollars to build newer shopping developments in a region with relatively flat growth. It just doesn’t work.

– Steve


Currently there are "9 comments" on this Article:

  1. Vince says:

    “Cresthood” is a glowing example of a suburban mall on a steep decline. The quanity and quality of stores continues to fall (BreadCo moved out, for chrissakes!) while apathy is at an all time high, if anyone cared to look. This is somewhat perplexing, as you would think Crestwood had all the rigth ingredients to be a successful operation — inner ring suburb, decent highway access, surrounded by mid to upper tax bracket residents (Webster, Sunset Hills in spittin’ distance)… but the clientele these days is anything but.

    The mall is just one example … the adjacent strip malls are becoming more and more vacant. Some of them almost completely vacant. The Circuit City plaza just east of the mall is now mainly just a turnaround parking lot for Guitar Center shoppers wanting to head east. Travel west down Watson and you get more of the same… case in point, the little strip mall where Service Merchandise once stood.

    This is sad considering in the mid 90s, Crestwood was a thriving albeit plain jane shopping establishment that served its purpose. How Westfield has let it fall from the little bit of grace it once had is mysterious, but it has happened.

    What does this say? Maybe the suburban mall is a doomed concept? I really don’t care, as I hate indoor shopping centers as much as the next person… save for when the temperature is below absolute zero and/or I’m in Minneapolis.

  2. Adam says:

    I think a Shop’n’Save just opened where Service Merchandise used to be. Better than SM but I doubt it will revitalize the strip.

    [REPLY Yes, a SnS just replaced the vacant SM store. Other activity included Walgreen’s building a free-standing location where a restaurant used to be and a new Mexican restaurant opened in the strip. These will give brief short-term boosts to the center but nothing sustaining. – SLP]

  3. In my opinion, St. Louis County muni’s need to shoot for the stars, rather than promote ‘more of the same only bigger.’

    In order to create a true return, these governments need to promote retail, residential, and office all in one. They need Boulevard-like establishments which incorporate office space, retail, and residential, rather than concentrate each in separate regions. That type of zoning only replicates the typical suburban landscape, which offers no benefit to the shopper, citizen, or business. One muni builds these old style developments, it creates a boom, then another does and it removes activity from the first one. Rather than creating this environment, these governments need to build unique developments which are pedestrian oriented, and create a draw that cannot be easily eliminated or reproduced. The government officials are probably panicking. They think if they throw money at a development, it will turn the community around. I think the history of these developments shows that this is not the case. Look at every big box mall, and you will see they all end in eventual decline. Shoppers flock to ‘the newer best thing.’ If muni’s create something so unique, it will always seem new and revolutionary, and people will support it.

    New Urbanism is the solution to traditional suburban developments which are doomed to fail.

  4. Don says:

    The abandoned homes and businesses at the location of the Rock Hill mall are finally being torn down, with the old Philips 66 station meeting the wrecking ball last night. The second-tier stores, the me-too branches of nearby franchises, and its close proximity to the Brentwood/Richmond Heights retail center won’t give Market at McKnight much more than a couple years of revenue. Once the shoppers tire of the novelty of the new Stein Mart, or when traffic at Michael’s falls flat due to knitting or crafting falling out of trendy favor, the mall will follow the path of Crestwood or the old Deer Creek Mall in Maplewood (which, BTW, looks to be a great place for either a soccer stadium or New Urbanist-style subdivision).

    On August 9th, there was an article in the Post-Dispatch about retail slowing down on Manchester Road west of MO 141, though the same slowdowns can be seen east of I-270. Brentwood Square etc., Maplewood Commons, and West County Mall have taken a large bite out of the shopping experience along Manchester Road, and I can point out a lot of vacancies between Maplewood and I-270. The Market at McKnight project will only accelerate the closing of retail stores along Manchester Road before it itself falls victim to changing shopping patterns.

  5. Joe Frank says:

    You couldn’t pay me to live on the site of Deer Creek Shopping Center. It’s flood plain. That’s partly why MetroLink is up so darned high above there.

    But it makes a fine place for a drivers’ testing facility!

  6. Jim Zavist says:

    No, Metrolink is so high to get over the existing railroad tracks (that are high enough to clear Deer Creek and the River Des Peres).

  7. Susanne says:

    Don – I totally agree with you.

    I wish Crestwood or Maplewood would raze their dying malls and/or some strip centers to build a neo-tradional mixed use neighborhood (ala New Town St. Charles). Just the personal fantasy of a city dweller facing moving out of my beloved neighborhood due the schools . . . .

  8. Jason says:

    I was called over the weekend by a wonderful telemarketer asking my opinion on the crestwood mall. They are looking at using a 1% sales tax increase to pay for improvements to parking and exterior areas. Funny thing is that I told her I dont live in Crestwood. I answered her questions basically saying how stupid it was to just focus on new better parking or some outdoor greenspace. I shop there on a regular basis as its the closest mall to my house in south city and I love malls (sorry steve- product of the 80’s I guess). Where else are people supposed to go when they lose power right? Also homeless people have a cool place to be when its 100 degrees out. Anyway, the whole place needs to be re-evaluated. The mall just does not function very well. Sure it would be great if they could do a “lifestyle center”. Todays catchy buzzword for mixed use retail and residential. But there really is no infrastructure to support it. How many people are going to buy a loft or similar condo over a strip mall in the middle of an aging inner ring suburban municipality?

    The phone survey concluded with her asking how many years I have lived in Crestwood… Again- Duh- I dont live there!

  9. ed hardy clothing says:

    We'r ed hardy outlet one of the most profession
    of the coolest and latest ed hardy apparel, such as
    ed hardy tee ,ed hardy bags,
    ed hardy bathing suits, ed hardy shoes,
    ed hardy board shorts , don ed hardyt,ed hardy tank tops, ed hardy for women,
    ed hardy swimwearand more,
    ed hardy clothing. We offers a wide selection of fashion
    cheap ed hardyproducts. Welcome to our shop or just enjoy browsing through our stunning collection available wholesale ed hardy in our shop.

    our goal is to delight you with our distinctive collection of mindful ed hardy products while providing value and excellent service. Our goal is 100% customer satisfaction and we offer only 100% satisfacted service and ed hardy products. Please feel free to contact us at any time; we are committed to your 100% customer satisfaction. If you're looking for the best service and best selection, stay right where you are and continue shopping at here is your best online choice for the reasonable prices. So why not buy your ed hardy now, I am sure they we won’t let you down.


Comment on this Article: