Developer asks city to allow bonds on future TIF, CID revenues to attract Capital Mall tenants

Capital Mall at 3600 Country Club Drive in Jefferson City is shown in this April 6, 2018, photo.
Capital Mall at 3600 Country Club Drive in Jefferson City is shown in this April 6, 2018, photo.

The local company redeveloping Capital Mall is looking for more upfront financial help to attract new commercial tenants to fill large spaces at the mall under redevelopment.

Rob Kingsbury, of Farmer Holding Company, whose subsidiary F&F Development purchased Capital Mall in 2012, told Jefferson City's Industrial Development Authority on Thursday the developer could sign leases to fill two large commercial spaces on the mall property if it could invest up to $9 million more upfront than it otherwise would have to be reimbursed for over several years through tax increment financing.

One of those opportunities, Kingsbury said, would be to fill the space that had been occupied by Sears, which closed its Jefferson City store at the mall in 2017.

"We are currently at just over 80 percent occupied at the mall, even with the 75,000 square feet of Sears not occupied," Kingsbury said. "We've got an opportunity now, that we've been working for about six months, to fill that Sears spot. We should be able to, within the next 90-120 days, sign a lease, but that would require us to invest $4.2 million in bonds to fill that with a single tenant."

Kingsbury said F&F Development is looking at two possibilities for the Sears space that would be "non-core retail uses."

Another opportunity for a restaurant to fill an outlot site on the mall property would require an additional $2 million investment from the developer, Kingsbury said.

F&F Development is proposing that Jefferson City allow the developer to bond on future tax increment financing (TIF) and community improvement district (CID) revenues.

TIF helps finance improvements to a property in a designated redevelopment area by allowing developers to be reimbursed for certain improvements through new tax revenues generated by the project. The Capital Mall CID uses sales tax revenue to help pay for improvements at the mall. The Capital Mall TIF and Capital Mall CID, when they went into effect in 2014, were expected to raise $10.6 million and roughly $5 million over 23 and 40 years, respectively, to help fund mall renovations.

"Originally, when they established the Capital Mall TIF and CID, it was a pay-as-you-go TIF," Jefferson City Counselor Ryan Moehlman said. "This means the developer pays for upfront development costs and is reimbursed for costs that are eligible under the TIF as those TIF revenues become available."

The Capital Mall TIF and CID have been doing what they are supposed to since 2014 - generating revenue to reimburse the developer for investments in the property, Moehlman said.

"What F&F would do is take the revenue generated by the TIF and CID and be redistributed back to the developer, which will allow them to get some funding up front through industrial revenue bonds to address some opportunities coming their way," Moehlman said.

The 1 percent Capital Mall CID generated $718,492 in 2018, city officials said Thursday. The latest figures from the Missouri Department of Revenue, as of October 2018, showed the Capital Mall TIF had generated more than $1.4 million.

Kingsbury said F&F Development hopes to get $8 million-$9 million from the bonds, which would be used to attract new businesses.

"Without money from the bonds, we'd have to wait to get caught up from collections from the TIF and CID to pursue any opportunities so that our balance sheet would look healthier," Kingsbury said. "This will not replace our current debt. We have done some financing through equity, such as the new Pizza Hut that opened recently on our property, but we can't do all projects through equity.

"When you have something good, you have to be able to react, and the bonds will allow us to do that.

"The quicker we injected capital, we felt the better the mall would be; so we could have done this two years ago, but the balance sheet hadn't been stretched as much, and now the timing is right with the market," Kingsbury added.

Moehlman said the city will do a revenue study to see if the revenue generated by the TIF and CID are sufficient to issue the bonds. He hopes to get that started next week and possibly have it done within 30 days. F&F Development would pay for the study.

"The bond market is very favorable at this time, and the interest rates are very appealing, so that's why we feel this is a good time to act on this," he said.

Moehlman said they do not anticipate amending the TIF plan, and there would be no additional money pledged out of the TIF to issue these bonds.

"This is not a completely risk-free project," Moehlman added. "The risk is reputation. The ability for the IDA to participate in future financing projects depends on how well this succeeds."

The city's Industrial Development Authority works toward commercial and industrial development and is tasked with issuing revenue bonds for projects.

The group consists of seven members who are involved in the areas of financing, construction and real estate. Members, who serve three-year terms, include Dan Westhues of Central Bank, Bob Gilbert of Bartlett & West, Hank Vogt of Re/Max Jefferson City, Bernie Fechtel of Fechtel Beverage, Cole County Collector Larry Vincent, Beth Utrecht with Providence Bank, and Jefferson City Convention and Visitors Bureau Director Diane Gillespie.

The IDA was created in 1946 to assist in growth and development of the city through industrial revenue bonds for use by industrial, commercial, multi-family housing and nonprofit development projects. Projects the IDA was involved with in the past include $2 million in bonds for the building of Hy-Vee in 1981 and more than $5 million in bonds for the Missouri Farm Bureau office and warehouse in 1990.

The group only meets when there are projects that fall within its small scope.

Although they took no formal action, the IDA board indicated they supported moving forward, and Moehlman said he anticipated the IDA would meet at least two more times in the next 45 days - once to hire an underwriter for the bonds and again to issue the bonds.

Jefferson City Area Chamber of Commerce President Randy Allen asked Kingsbury during Thursday's meeting what he thinks about the future of the mall.

"We believe properties like Capital Mall will continue to change, as similar properties have done in other parts of the country," Kingsbury said. "Amazon and online shopping is a great thing, but it does limit the number of tenants that would have historically occupied properties like ours. I think, though, because of the location of Capital Mall, you're going to see more multi-use out of this space. It's not going to be all retailers. You'll see more office users, more entertainment users and more food offerings.

"It's a lot more work than we thought it would be seven to eight years ago, but we feel the mall will be as good or better as time goes on as long as we're very flexible and sensitive to different users."

Kingsbury noted some bright spots among the retailers that currently occupy the mall.

"Ross and Dunham's are continuing to do well," Kingsbury said. "We keep our eye on Dillard's and JCPenney, and our JCPenney is one of the few the company has done investment in recently. Only the top-performing stores got that investment.

"That's why bonding is so important - so we have the resources if and when we get space back or we get large users come to us wanting to occupy the mall."