Niagara Gazette

February 27, 2013

Town of Niagara IDA agrees to tax deal for $71M add-on to the Fashion Outlets

By Mark Scheer
Niagara Gazette

Niagara Gazette — TOWN OF NIAGARA — The proposed $71 million expansion at the Fashion Outlets of Niagara Falls moved one step closer to becoming a reality on Wednesday.

During a meeting at town hall, the board of directors for the town's industrial development agency voted unanimously to accept an application for a payment-in-lieu-of-taxes deal that the mall's owner says is needed to allow the expansion to proceed. 

Doug Morrow, vice president of development for mall owner, Macerich Partnership, LP, told board members the proposed expansion would result in the addition of 230,000 square feet of gross building area on site, including roughly 175,000 square feet of new retail space as well as additional parking. 

"After we do that, we will be probably one of the top 20 largest outlet centers in the country," Morrow said. 

The retail addition would be built as an attachment to the existing outlet center's main building and would incorporate part of the adjacent Sabre Park mobile home property, which was acquired by Macerich affiliate, Fashion Outlets II, last year. The new retail area would allow for the addition of about 50 stores, adding to the 150 currently operating at the center. 

Morrow said his firm has either signed leases or is in negotiation with companies to do so on close to 89 percent of the proposed expansion space. While he said he could not divulge the names of any potential leaseholders, he said they would be higher-end retail companies in keeping with the type of stores currently found on site. 

"We think we're solidifying this property for many, many years to come," Morrow said. 

Macerich views the expansion as a way to continue meeting the needs of the outlet mall's customers, especially Canadian shoppers whom Morrow said currently account for 82 percent of all sales.  

He said the company is also looking to keep pace with competitors, noting that there are plans for several new or expanded outlet malls in southern Ontario, including one recent proposal for the development of a new center in Halton Hills, west of Toronto. 

"The competition that is popping up in Canada is very concerning to us," Morrow said. 

Town Supervisor Steve Richards said the expansion project's estimated $70 million price tag does not include improvements to be made to the interior of the additional retail space, which he said could add as much as $18 million more to the overall value. 

"For us, this is probably the biggest private investment in the town in its history," Richards said. 

The mall's owners are seeking a 15-year PILOT agreement. If approved, the owners would enjoy a reduced property tax rate on the value of the addition as well as sales tax exemptions on certain purchases tied to the construction project. 

Richards and Morrow said Macerich also has been in talks about other incentives that may be available through the state-run Empire State Development Corp., although Morrow said a deal with the state has not yet been finalized. 

Town of Niagara IDA attorney Mark Gabriele said under the proposed PILOT agreement the company would pay a graduated property tax rate, starting out in the first few years at 20 percent of the assessed value of the addition and increasing to 50 percent by the end of the term. The existing mall structure also remains under a 15-year PILOT, which IDA officials said has roughly 12 years remaining. 

In exchange for the tax breaks, Morrow said his firm is offering not only an expanded and more appealing outlet center, but new jobs - both construction-related and permanent - as well as continued and enhanced sales tax revenues. 

Macerich estimates that the proposed expansion, including construction and full- and part-time jobs at the outlet center - will lead to the creation of 925 positions, both direct and indirect. The company estimates that the project will result in roughly $16 million in additional sales as well, including $4 million in new revenue from Canadian shoppers and $12 million in local spending outside the mall on things like hotel stays and restaurant visits. 

The project is not yet a done deal. The IDA board set a public hearing for 2:30 p.m. March 13 at town hall. Gabriele said the board is expected to vote on the PILOT agreement following the hearing.

In addition, the town's planning board must approve a site plan for the expansion, which Richards said also must be approved by the town board itself. Richards expressed hope that all the necessary approvals could be in place in a matter of months, allowing construction to begin before year's end. 

"I'm hoping six months or less," Richards said, referring to the timeframe for the approval process.