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.