INVESTIGATION: Questions Arising over Millions in Payments by Providence Place Mall
GoLocalProv News Team and Kate Nagle
INVESTIGATION: Questions Arising over Millions in Payments by Providence Place Mall
The tax stabilization agreement (TSA) first executed in 1994 and amended in 1996 between the City of Providence and the developers of the Providence Place Mall required the mall to establish a number of partnerships and business investments in the city in exchange for reduced tax payments.
Now, a GoLocal investigation raises questions about the enforcement of those TSA requirements, and as well as how much the mall is required to pay in property taxes.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTProvidence Place Mall is currently owned and operated by one of the largest retail real estate companies in the country, General Growth Properties, Inc, which is an S&P 500 company that owns, operates and leases approximately 1,100 shopping malls.
The City of Providence and the State of Rhode Island entered into an agreement with original mall developers Commonwealth Development to provide for a tax stabilization agreement through 2028 worth hundreds of millions of dollars.
Two sales of the mall later, Providence Place might not be in compliance with provisions of the TSA.
Sales, Estoppels, and Taxes
GoLocal recently inquired as to where the mall stood in terms of meeting the TSA requirements, and was told by PPM spokesperson Dante Bellini it was his understanding that when Commonwealth Development sold the mall to The Rouse Company (who then sold it to GGP), the city gave an estoppel for the sale and the TSA items were not requirements to proceed.
"You can't change a TSA without city council approval, it's an ordinance," said City Councilman Kevin Jackson, who is the longest serving member of the council, having first been elected in 1995.
The city, however, was unable to produce any copies of any estoppel certificates when requested by GoLocal; PPM GM Mark Dunbar said it was up to the city to provide the documents.
“Mall ownership has changed twice since the TSA document was executed,” said Dunbar. “Accordingly, the City of Providence is the best source for this historical data.”
Moreover, the amended version of the TSA in 1996 delineated a payment-in-lieu-of-taxes schedule for the mall of $3.5 million each of the first five years, followed by $4.7 million each of the following twenty years, and finally $5.9 million for the final five years of the agreement.
According to the agreement, PPM would have paid $4.7 million in lieu of taxes last year. Providence Internal Auditor Matt Clarkin said that according to records, the mall paid $300,000 during that time.
City Council President Luis Aponte said Wednesday that he had a number of questions regarding TSA requirements, and will be looking into it.
“In an abundance of caution, I will be asking the auditor and staff to begin a review of the mall, the TSAs, and any amendments to ensure that any changes, if made, were done appropriately, and more importantly, were done in the city’s best interest,” said Aponte. “There were a bunch of moving parts that require further explanation. Whether there was a commitment to train and hire students and Providence residents, we need to understand how that occurred. It was a complex deal in the way it was structured. We need to understand the provisions, and the enforcement.”
“If the city waived any of the requirements, was that waiver done appropriately, and should it have gone back before council - those need be addressed,” said Aponte. “If the city’s entitled to recover back taxes, again we need to act in the best interest of the city.”
GGP’s Big Rebound, Eyeing More Changes
GGP acquired Providence Place as part of a $14 billion, 37-mall deal with The Rouse Co. in 2004 – a transaction for which GGP reported taking out an $8 billion, four-year acquisition loan. Maryland-based Rouse had acquired Providence Place two years earlier, in a $522 million deal with developers The Providence Place Group.
But GGP, one of the largest REITs in the county, last fall announced that it might be forced to file for bankruptcy, citing about $27 billion in short-term debt, including $958 million due late last year.
In 2014, Crain’s Chicago Business reported that GGP’s CEO Sandeep Mathrani saw his total compensation reach over $22 million for the previous year. Wrote Crain's:
Mr. Mathrani's total compensation for 2013 topped $22.1 million, according to a proxy statement the real estate investment trust filed today with the Securities and Exchange Commission. That's a more than fivefold increase from 2012, when Mr. Mathrani's pay totaled $4.2 million.
Councilman Jackson said that if there were found to be grounds to revisit the TSA compliance, he would support it.
“[TSA] oversight has always been the issue, with the city having such a huge investment and long term agreement with PPM,” said Jackson. “I think we should be making sure the neighborhood groups and nonprofits have the support they need, I think its absolutely worth revisiting. We want development, we want cranes -- but we only want cranes if it benefits everyone. If we're giving away things, there needs to be some benefit to the city.”
Jackson said whether the PPM is currently in compliance could have an impact on future negotiations.
“I think it would impact future negotiations. I'd have to get a handle on what happened again on follow through,” said Jackson. “But you have to be in compliance with your first requirements to get your second. And if nothing's found out, nothing's found out."
Council President Aponte said the city has been in talks with the mall about potential substantive changes.
“There have been conversations about reconfiguring the retail square footage of the mall, and expanding parking,” said Aponte. “So does it require an amendment to the TSA, and does it affect the state’s agreement with the mall? There are bonds that were strict and narrow about square footage of retail and the types of tenants, so there may be implications to the TSA as far as the city’s concerned, and also the state.”
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