PROVIDENCE – City lawmakers are considering giving another 20-year tax break to the company that owns the Providence Place mall.
The City Council on Thursday introduced an ordinance calling for a new tax treaty with Providence Place LLC that would cut more than 80% of property taxes the company would owe the city through 2048. Rather than paying roughly $25 million in annual city taxes, based on the $708.7 million property value as of 2022, the owners would give the city $4.5 million a year.
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The city already gives the mall owner, run by parent company Brookfield Property Partners LP, a similar discount on taxes as part of a series of state and local incentives offered when the mall opened in 1999. Under the existing, 30-year tax agreement, which runs through 2028, the company pays about $500,000 a year through a payment-in-lieu-of-taxes agreement.
The new tax deal not only extends the tax discount for another 20 years but also gives the mall owner more freedom to “reinvent” the mall as more than just a retail space.
Brookfield has owned the mall since 2018, when the global commercial real estate firm acquired the previous mall owner, GGP Inc.
The mall, a centerpiece of Providence’s “renaissance” in the late 1990s, has had a rough go in recent years.
The shift to online shopping coupled with a pandemic has cost the company anchor storefronts including Nordstrom and J.C. Penney. Last year, the company defaulted on its mortgage loan, unable to make the final payment that was originally due in May, PBN previously reported. A new deal worked out with a special servicer gives the company the option to extend the 10-year loan for several years, which the company is expected to do. So far, it has remained current on its new payment schedule, according to a Fitch Ratings report in April.
Although Fitch affirmed the company’s “AAA” ratings in April for pass-through certificates on the mall, which are secured through the existing tax deal with the city, the rating agency also said the mall’s performance continues to “trend downward.” The mall has yet to see its operating income return to pre-pandemic levels, with profits falling 16% from 2020 to 20221 due to drops in parking revenue and other sources and higher operating expenses, according to Fitch.
In its proposed ordinance, the city also stresses the need to “reinvent the shopping center experience,” reiterating how online shopping and the closing of national retailers is making it hard for the mall to survive.
The new tax treaty, if approved, not only continues the tax discount for the mall, but also expands how the property can be used. Instead of focusing on retail sales, as the existing agreement states, the new proposal would let the owners redevelop the space, adding office, education, residential and medical uses, among others, to the existing shopping center.
“The city and its residents cannot afford to see the mall abandoned and shuttered, but any tax agreement needs to reflect equity across the board,” City Councilman John J. Igliozzi said in a statement on Thursday.
Igliozzi in an interview Friday said the council’s ordinance was intended to “begin conversations” about the future of the mall and the partnership between its owners, the city, and the state. He was unsure whether the review process would make it to a vote before the change in administration, which includes the departure of term-limited council members such as Igliozzi.
Igliozzi likened the redevelopment process to that of the “Superman” building, which took several years before a plan came together.
Igliozzi also said he did not know the specifics of the mall owners’ redevelopment plans.
In a statement on Friday afternoon, Lindsay Kahn, a spokesperson for Brookfield Property Partners, the parent company of Providence Place LLC, said the company needed the new tax treaty in ensure ” our reinvestment in Providence Place can meet the changing needs of the market.”
“These discussions are happening now because there is a realization that if we don’t have an agreement in place, it will make investment in the property difficult,” Kahn said.
Kahn also said the company “remains committed” to the Providence community.
She declined to comment on the company’s outstanding loans for the property except to say they “continue to work with our lenders.”
The mall, which opened in 1999, was financed through a series of deals including a state bond and a tax treaty with the city of Providence. Personal property taxes have also been largely waived. The state deal used mall sales tax revenue to repay the debt on the bond that paid for construction. The state made its final, $73 million payment on the bond in 2019, WPRI reported.
The mall owner is also still leasing the property, which it bought and immediately transferred to the state’s economic development arm, then known as Economic Development Corp., in 1995. R.I. Commerce Corp. did not immediately respond to inquiries for comment about whether the ground lease, in its 27th year, would need to be changed to incorporate the new tax treaty.
The proposed tax agreement, which was introduced as an “off docket” item Thursday – meaning it was not part of the public agenda published beforehand – was immediately referred to the city Committee on Finance for future review, including opportunities for public comment.
(Update at 2:38 p.m.: Adds comments from Igliozzi added in 11th, 12th and 13th paragraphs)
(Update at 4:55 p.m.: Adds comment from Brookfield Property Partners.)
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
Isn’t the General Assembly always complaining about needing more office space, with many small and cramped and others located deep in the basement of the Statehouse or across the street?
Why not put offices in the Mall? Take an entire section and turn it into a local government offices section with many different officers for elected officials from across the state?
That would make it easier for constituents to visit their local representative’s offices.
Waste of taxpayer dollars.