The Board of Mayor and Aldermen gave unanimous approval Tuesday night for the Kingsport Economic Development Board to begin negotiations with Hull Property Group for a financial incentive package for the renovation of the Kingsport Town Center.
HPG, an Augusta-Ga.-based real estate firm, is requesting a payment in lieu of taxes (PILOT) incentive for the renovation and improvement of the mall property, along with replacing the operators of the theater space in the first phase.
The PILOT would be for a 20-year period and would essentially allow Hull to pay the city a reduced amount of property taxes during this time. The payment amount is not known at this time and will likely be hammered out by the KEDB next month.
According to information provided to the Board of Mayor and Aldermen, improvements such as those proposed for the mall have historically brought a year over year increase in sales of 18 percent, on average. With a more conservative 15 percent increase in sales, the city would receive more than $73,000 annually in taxes.
Alderman Tom Parham said he has heard more comments about the mall from the public than any other issue in a long time.
“It's woken them up and they've all been very positive, an endorsement to see our mall be successful,” Parham said, adding that he would like to see HPG representatives visit Kingsport on an annual basis to keep city officials informed on the mall's progress. “To see how the investment is paying off.”
Alderman Darrell Duncan said he would like to see metrics from the project and Alderman Tommy Olterman said the move would make the city more transparent to the public.
Alderwoman Colette George challenged residents to shop in town, especially if they want to see stores remain and relocate to Kingsport.
“If you want stores to come here, you have to shop and support the people who have stores here,” George said. “Stores aren't going to come here if you're willing to drive the distance (to other stores). We need to shop there and support them every chance we can.”
One reason for the incentive is because Kingsport has a mall that is depressed, Mayor John Clark said.
“Some people think, why are we spending this money on the mall? We are supporting an investor trying to make a go at it,” Clark said. “Very few people would take this on and we know we're going to see improvements based on the other malls (of HPG) we've seen already.”
Development Services Director Lynn Tully, who has been working with HPG on a possible PILOT plan, said on Tuesday the hope is to have a proposal on the table for the KEDB's January meeting. The negotiations would involve representatives from HPG, the KEDB and most likely Tully.
Tully told the BMA on Monday that a PILOT is needed to get the mall property ready to attract tier one tenants, including an additional sport retailer. If the PILOT is approved, the total redevelopment plan would have up to three phases, possibly a fourth.
HPG plans to invest $4 million to $6 million on this first phase, Tully said.
Hull Property Group acquired the 40-year-old shopping center in June and touted its track record of re-positioning underperforming enclosed malls and shopping centers in small markets. HPG is overseeing the leasing, property management and marketing operations for the Kingsport Town Center and recently moved to have Frank Theatres evicted from the premises.
HPG Owner and Managing Principal James Hull recently told the Times-News that instead of recruiting new tenants at this time, his firm wants to renovate the mall’s interior, possibly beginning in February 2017. Hull said he hopes to invest more than $4 million in the property, and transform the mall into more of a “fashion-type mall” catering to apparel tenants.
“What we first have to do is address the physical plant and how we can transform it into an attractive experience for the shopper ... we’re not going to make a tremendous investment and hope it works out ... everybody believes this is the right approach,” Hull told the Times-News. “This mall didn’t fail in a half year, and it’s not going to be brought back in a half year.”
Hull Property Group has a portfolio of retail property in excess of 14 million square feet including 25 enclosed malls across 11 states.
For more information visit www.hullpg.com.