I have said it before and I will say it again: I will talk to anyone to get information. To that end, I contacted Mosaic to ask some questions about the upcoming ATC deal. I was very fortunate to have a long conversation with two execs from Mosaic, Isaac Pretter and Eron Sodie. These gentlemen took an hour and a half out of their day to discuss the ATC development and it's particular woes with BTW. They were very forthcoming and answered all of my questions. I had a lot of them but mainly I wondered what in the world has caused so many problems with ATC? It sat undeveloped for a decade but it is a prime location, right off the highway and close to other major shopping outlets. It doesn't make much sense to the casual observer.
First, a little history. A company called Ramco-Gershenson was the prior owner of the ATC property. Any one who lived here 15 years ago may remember that Shopper's Food Warehouse and Big Lots were once in ATC along many other small businesses like the coffee shop and paintball place and of course, the movie theater. It wasn't exceptionally nice or modern and when Shopper's vacated to set up shop in Stafford Marketplace, ATC suffered. Ramco decided it was time to make a change and came up with a very ambitious plan to overhaul the entire property. The plan included 700K square feet of commercial space, apartments and office space, the whole "Live, Work, Play" package. They slowly got rid of their tenants and started tearing down buildings. Then, the housing bubble burst and the recession came. Large businesses that could anchor the property stopped expanding and the project came to a screeching halt. The movie theater, Rite-Aid and the office building remained but the rest of the property was concrete and rubble.
Eventually, Ramco realized that they would never be able to bring their dream plans to fruition so they sold the property. First, they sold the rights and land to build the apartments. They opted to keep the office building and they sold the 25 acres of commercial property to Mosaic in June of 2015. Prior to their acquisition, Mosaic came to the BoS and requested the Incremental Tax Incentives to the tune of 6.25 million to be paid over a maximum of 15 years with 75% of the tax revenue from the project heading back to Mosaic annually until the total was paid. Mosaic's plans for the property were less ambitious, with only 167K square feet of commercial space but they were confident that they could make something nice out of the stagnant project. They had lined up Harris-Teeter as an anchor store and they were very optimistic about the future of the property. But, as we know, there were snags...many snags.
It turned out to be quite difficult to ink an agreement that satisfied both Harris-Teeter and Rite-Aid. Mosaic explained that one of the major hurdles in getting a grocery store into ATC is the fact that Rite-Aid has a long lease with low rent and exclusive pharmacy rights. This makes it tough to bring in a grocer that also has a pharmacy inside, like Harris-Teeter. There was a lot of back and forth between the developer and the two stores and every time they seemed to get close to signing something shifted, creating more delays.
It took three years of hard work to try to come to an agreement that would work for everyone but finally, everything fell into place. In the first quarter of this year, they were set to ink a deal: Rite-Aid would get a new building with a drive-thru and would keep their low rent, Harris Teeter would get a pharmacy. Then in April, disaster struck. Kroger, the parent company of Harris Teeter, decided to pull all of their H-T expansions on the east coast due to a bad earnings report. Harris Teeter was out and with no other grocery options, the deal was dead.
But Mosaic wasn't about to give up that easily. They insisted H-T come back to the table. I can appreciate their chutzpah. They succeeded and the end result was the recent request to the BoS for $12 million more in tax incentives, which goes directly to Harris-Teeter. According to Mr. Pretter and Mr. Sodie, this is a last ditch effort to make this deal work and bring something to ATC.
It is abundantly clear to BTW that these guys are not trying to do anything shady or underhanded, they genuinely want to make something good happen at ATC. They did not make any statements regarding the board's 2015 approval process but in my estimation, any secret dealings that were done were on the part of our 2015 BoS and had nothing to do with them. They were adamant that the BoS at the time asked all the right questions and did their due diligence. It is unfortunate that the BoS at the time did not share their findings with the public.
The single, most important thing they wanted me to share with readers was that in their estimation, this deal is a win-win for Stafford. "$4 million or $40 million" was a phrase I heard multiple times. These numbers reference the new revenue brought to Stafford over a maximum of 30 years, projected to be $72 million according to a study commissioned by the county. If things stay as they are, Stafford will generate $4 million in revenues, if the BoS approves this deal Stafford gets $40 million over 30 years. The $30 million difference is that would ultimately be paid to Mosaic over the maximum of 30 years. $40 million is a lot more than $4 million, of course. When I asked Mr. Sodie what would happen if the request was not approved, he said "It would be a shame for Stafford County residents."
But what would actually happen if the BoS does not approve their request? Rite-Aid is not going anywhere and they have close to 20 years left on their lease. Mosaic could sit on the property, wait for the Rite-Aid lease to end and then do something with the property....in...20...years. Or, they did admit that if they could find a buyer and recoup their investment, they could sell the property to another developer. They said they have "other fish to fry" and might not be particularly be inclined to invest more resources in the project.
Find images of the plans for ATC and the brochure for the project at Mosaic's website.
I will save my comments and thoughts on the deal for another post, in the interest of getting information to those who may want it. By sharing Mosaic's perspective I am not endorsing the tax incentive plan. Look for the post with my opinion on the deal very soon.