Santa Rosa's development agency agreed Monday to give the owners of Coddingtown mall a $2.2 million low-interest loan to help them pay for utility upgrades needed to attract new tenants.
Codding Enterprises CEO Brad Baker told the agency it wasn't that long ago that the mall was an economic powerhouse with 100 percent occupancy and shoppers from around the region. Today, despite the arrival of a new Whole Foods Market, the mall struggles with a 40 percent vacancy rate, he said.
"We're trying to become that regional spot again and regain some of that glory that we once enjoyed," Baker told the redevelopment agency board.
Baker said his firm, and its partner Simon Property Group, would use the money to attract the kind of high-volume tenants that will not only boost the mall's fortunes but the city's revenues through higher sales taxes.
Getting such a loan from a bank is challenging, Baker said, because many of the upgrades the 1960's era mall needs &#8211; including new sewer, water and electrical upgrades needed by high-volume tenants &#8211; involve the mall's core utility capacity, costs that can't be recouped through individual tenant leases.
Chairman Bill Arnone and others praised the loan as "creative" and serving the precise function redevelopment agencies are supposed to, namely filling a funding gap needed to get a project off the ground.
Board member Charles Evans said that since Gov. Jerry Brown has taken aim at redevelopment agencies, the media has stressed the wealth of some corporate recipients of redevelopment dollars.
"But part of the purpose here is to get them to spend their money on you, and this is how you go about it," Evans said.
Alice Miller, redevelopment specialist for the city, explained that in exchange for the 12-year, 3 percent loan, the city would get an easement allowing it to expand a bus stop on Range Avenue, eliminating a dangerous arrangement that requires busses to turn around in a parking lot.
The loan's repayment is structured to allow some of the principal and interest to be repaid through an anticipated increase in property tax.
The theory is that the loan will create a strong incentive for the owners to aggressively upgrade and find new tenants for the mall.
"We wanted to provide them the incentive. The more they put in, the more the (loan) obligation goes down," said Tim Kelly, president of the consulting firm Keyser Marston Associates.
It's unclear just how much Codding and Simon plan to invest. Baker said plans to bring in a single new eatery, BJ's Brewhouse Restaurant, are likely to cost $2.2 million in upgrades alone.
He said he would eventually like to see more than a dozen new retailers at the mall.
Some board members urged caution.
The note is to be secured with a personal guarantee, but board member Phil Olsen wondered if that was sufficient security. There are news reports all the time about such malls not making it, he said.
"It may be chump change to Simon, but $2.2 million is a lot of money to this redevelopment agency, and there ought to be some kind of security in that note," Olsen said.
Baker acknowledged that the agency's loan would be in second position behind a $27 million loan from Bank of America, but assured the board that sufficient equity exists. He noted that the loan payoff assumed the mall's value at $65 million.