There has been a lot of news lately regarding the Medley Centre, (aka Irondequoit Mall),and the battle between the East Irondequoit school district and developer Scott Congel over unpaid taxes. Some will suggest this has to do with a struggling local economy, but I see something different.
It actually got me thinking about this past holiday season and how I managed to make it all the way through without ever going to the mall. I did a lot of online shopping and most of what I did buy from brick and mortar stores was purchased from local retailers without a web presence. Apparently, it's not just me, because foot traffic in malls across the United States was down almost 15% in 2013. While retailers were encouraged by increased in-store sales, mall owners saw fewer bodies and worried about a collapse in demand for commercial space. We're already seeing this as Sears and JP Penney close stores and malls struggle to replace them with new anchors.
Locally, Monroe County just gave tax breaks to Marketplace Mall to attract sporting goods store, Field & Stream. A similar deal was setup for the former Bon-Ton location at Greece Ridge. Why would cash strapped Monroe County authorize tax breaks to two relatively healthy suburban malls? Apparently Marketplace and Greece Ridge couldn't attract anchor stores to replace Bon Ton without throwing in some incentives. That just goes to show you how healthy they both happen to be.
Now back to Irondequoit. A lot of people are questioning Scott Congel's intentions with regard to the Medley Centre, but I think it's painfully simple. There are currently three area malls and most people in the Rochester metro can get to one of them in fifteen minutes or less by car. Since the mall in Irondequoit has been essentially closed for the last decade, any excess demand that ever existed would have fled to the other three by now. This means that revitalization was only possible in Irondequoit by creating something new or different. Casinos, theatres, and hotels were all good ideas, but required a lot of capital, which wasn't available during and after the recession. Now that capital is flowing more freely, the mall business model itself is facing more scrutiny.
My expectation is that Congel will continue to skip payments. The East Irondequoit school district will sue and (replace-to) void the tax advantaged program and they'll be left to figure out what to do with a mall that the area does not appear to have any use for right now.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).