The city of Indianapolis has struck a deal with Simon Property Group Inc. to keep Circle Centre mall’s lone remaining anchor store from leaving.
Under terms of the deal, Carson Pirie Scott will save $300,000 annually through the next three years, until Jan. 31, 2018, through a rent reduction at the downtown property.
The amount is approximately equal to how much the mall's ownership group would pay in property taxes on the Carson Pirie Scott property during that period.
To make that happen, the city will remove the department store owner from its lease agreement with Simon and allow it to continue as a tenant under an “operating agreement.” The parking garages at the mall operate under a similar pact and do not produce profit because the revenue they generate pays operating expenses.
The mall is owned by a public-private partnership between the city and several local investors led by Simon, which manages the mall. The city’s Metropolitan Development Commission will consider the Carson deal at its Dec. 17 meeting.
Department of Metropolitan Development Director Adam Thies introduced the arrangement to MDC members Wednesday afternoon.
A city report on the deal said losing Carson's would have a "devastating impact on the mall, surrounding properties and businesses."
“Carson's had the right to leave when Nordstrom left, but they didn’t,” Thies said, referring to Carson's lease agreement. “At the end of the day, if the mall begins to decline, we’re in big trouble.”
Many brick-and-mortar retailers are struggling to attract consumers who instead are choosing to purchase items through the convenience of online shopping.
Replacing Carson's, if it left, would be unlikely, the city said.
"Retaining [Carson's] at the mall is of heightened importance because [Simon] has been unable to find another tenant that is willing (without tens of millions of dollars of cash incentives) to operate a department store in the mall," the city said.
Former anchor Nordstrom left a 210,000-square-foot hole in the mall when it left in 2011—space that Simon was unable to backfill with another anchor tenant.
The Indianapolis Star took about half the space when it moved in late September into three floors at the south end of the mall. At the north end, along Maryland Street, Yard House is taking more than 13,000 square feet. And retail brokers have told IBJ that Cincinnati-based Nada, an upscale Mexican eatery, and Syracuse, New York-based Dinosaur Bar-B-Que, are nearing deals with Simon to take some of the remaining space.
To help compensate the city for the lost property tax revenue, Circle Centre mall will assume responsibility for $150,000 in annual mall garage operating expenses currently assumed by DMD.
“We think this is a solution that allows us to have our tenant there for the near-term,” Thies said.
In the meantime, the three-year deal gives the city and Simon time to develop a plan for the “long-term viability of the mall.”
The mall opened in 1995. Non-anchor occupancy is 96.7 percent, Simon said in its latest annual operating report to the city.
But sales per square foot slid from $354 in 2012 to $326 in 2013. Simon attributed the decrease to an inability to match the vast amount of foot traffic from the thousands of visitors who converged on downtown for the 2012 Super Bowl.
Carson Pirie Scott & Co., founded in Amboy, Illinois, in 1854, is owned by York, Pennsylvania-based Bon-Ton Stores Inc., which operates about 275 stores under different names in 23 states. The Carson's chain has about 40 stores in Illinois, Indiana and Michigan.