Missouri mall is latest to be redeveloped with municipal bond support

A Missouri government is the latest to offer government support — funded through municipal bonds —to revive a moribund mall. 

But developer River City Centre’s plan for West Park Mall in Cape Girardeau, a city of 40,500 along Interstate 55 about midway between St. Louis and Memphis, breaks with the current trend of converting malls to mixed-use developments with less retail and more residential, office and public park spaces.

Instead, the developer intends to draw new retailers to the mall: Sierra Trading, Petsmart, Ross, Michaels, Carters and Ulta, to name a few. There are a total of 473,135 square feet set aside for retail upon completion of the project, which will also add restaurants to the mall.

River City Centre LLC, was the only firm to answer the city’s request for proposals. RCC representative Nick Martin did not respond to requests for comment.

West Park Mall was developed in 1981 by Drury Development Corporation, a southeast Missouri-based firm. But in recent years, its owners included Centro Properties, based in Australia, and LNR Partners, headquartered in Miami Beach, Florida.  

The mall never really recovered from COVID-19 and by 2023 was doing worse than at the height of the pandemic. Its overall historical taxable sales dropped to $40.447 million in 2020 from $49.966 million in 2019, according to an online investor presentation about the bond deal. After a brief uptick in 2021 to $47.5 million, sales plunged to $38.688 million in 2022 and $34.789 million in 2023.

On Sept. 3, the Cape Girardeau City Council approved an ordinance authorizing the issuance of tax increment and special district revenue bonds tied to RCC’s redevelopment plan, and pledging certain revenues for payment of principal and interest on the bonds. It passed 5 to 1.

“Foreign ownership had not promoted or engaged in any upkeep of the property, and it was truly a ‘dying mall’ in every sense,” said Cape Girardeau Mayor Stacy Kinder, who voted for the ordinance authorizing the bonds. “Stores had been moving out at a steady rate, and sales and property values were lagging severely. When the local development group bought the property… they developed a plan to rebuild the mall into a thriving business entity.”

In 2021, RCC bought 63 acres — the mall property minus the JCPenney parcel — in the southwest corner of Cape Girardeau’s Ward 6.

Ward 2 Representative Tameka Randle, who voted nay and whose ward borders that corner of Ward 6, did not respond to requests for comment.

According to the preliminary limited offering memorandum, the Industrial Development Authority of the County of Cape Girardeau is issuing the unrated bonds, which are special, limited obligations of the authority and are payable solely from the funds provided for in the financing agreement and the indenture. 

Underwriter Stifel priced the deal Tuesday.

The $27.75 million of unrated Series 2024 revenue bonds “involve a high degree of risk,” including the risk of nonpayment, according to the offering document. 

“It is expected that a substantial portion of the Series 2024 bonds will be redeemed prior to maturity,” the offering document said.

Bond proceeds will reimburse the developer for costs related to the redevelopment of West Park Mall, fund a debt service reserve and capitalized interest’ and pay the costs of issuance.

“The incentives package and bonds were integral parts of the [developers’] redevelopment plan, and that case was made clearly to the local TIF commission and to the City Council,” Kinder said.

The $104 million redevelopment agreement includes $55 million of private funding and a $49 million incentives package: $18 million of tax increment financing, $18 million from a Community Improvement District and $13 million from a Transportation Development District, Kinder said. 

“The agreement stops the impact of the mall’s plummeting property value,” she said. “Taxing districts will be ‘made whole’ if assessed values drop below initial assessments. [And] if the mall is sold within 10 years, the agreement would require a share in incentives proceeds to go back to the city and various other taxing districts.”

Critical public services in Cape Girardeau are funded primarily through sales taxes, according to Kinder, so there is a symbiotic relationship between the health of the city’s retail economy and the health of its government.

The developers laid out a vision for national retail brands to locate in the redeveloped mall, she noted: “Their financial plan rests on seeing those retailers move into and thrive in the mall.”

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Piper Sandler is the financial advisor on the deal. The bond counsel is Gilmore & Bell, P.C. 

The bonds, which are restricted to accredited investors and qualified institutional buyers, have a final maturity of May 2054, but they are subject to special mandatory redemption on and after May 1, 2026, according to the investor presentation. 

RCC’s redevelopment plan divides the redevelopment area, which excludes the JCPenney parcel, into six sub-areas. The City Council authorized tax increment financing within Redevelopment Project Area 1 on Sept. 3. The other sub-areas have not been approved yet.

Cape Girardeau has also created the RCC Community Improvement District, whose boundaries include the redevelopment area and the JCPenney parcel, and the RCC Transportation Development District, whose borders match those of the CID. 

On Sept. 3, the Circuit Court of Cape Girardeau County certified the results of an election among property owners within the proposed Transportation Development District to create the TDD and impose a new 1% sales tax in the district.

Pledged revenues for the bonds consist of TIF payments in lieu of taxes generated within RPA 1; if tax increment financing is approved for RPAs 2-6, their TIF PILOTs are not pledged. Pledged revenues also include TIF economic activity taxes generated from RPA 1 and from RPA 2, if it’s authorized; TIF EATs from RPAs 3-6 are not pledged. Finally, pledged revenues include the TDD’s 1% sales tax revenues from RPA 1 and RPA 2 and the CID’s 1% sales tax revenues, both which are subject to annual appropriation.

None of the revenues from a potential CID special assessment are pledged to pay the principal of, interest on or redemption premium on the bonds.

The entire property was classified as a blighted area in April 2023, according to an RCC press release.

A revenue study completed by Florida-based Raftelis Financial Consultants, Inc. assumes a 5.8% vacancy rate in 2026 — down from 89.9% in 2024 and a projected 47.8% in 2025 — and every year after through 2046. It assumes the annual assessed value will jump from $896,000 to $3 million to $5.99 million to $6.02 million over the course of the next four years, and will continue climbing after that.

The study also assumes voters will authorize the renewal of each of the expiring sales taxes prior to the scheduled sunset dates. There are five economic activity taxes in the redevelopment area, the first of which is set to expire in December 2025.

Raftelis’s Steven McDonald did not respond to requests for comment.   

“Cape Girardeau has always been the regional hub for economic activity, and needs to continue that designation,” Kinder said.

Risks to bondholders include the risk of non-appropriation; possible failure to achieve and maintain levels of assessed valuation; limitations on remedies; early redemption prior to maturity; defeasance risk; construction risk; no mortgage; and reliance on owners and tenants, among others, according to the investor presentation.