CITY OF MILFORD PLANNING AND ZONING BOARD SEPTEMBER 15, 2020 PUBLIC HEARING Connecticut Post

Regulation Change

Application

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City of Milford Planning and Zoning Board Connecticut Post Regulation Change Application

September 15, 2020 Public Hearing

KEY FACTS

Malls and Brick & Mortar Retail’s Uncertain Future Pg. 3-4 Negative Macro Retail Trend Impacts on Connecticut Post Pg. 5 Other Negative Impacts Facing Milford Pg. 6 COVID Impacts on Malls and Brick & Mortar Retail Pg. 7-8 Centennial’s Vision for the Future Pg. 9-10 Economic Benefits for Milford Pg. 11 Complimentary Uses as the Most Viable Option for the Future Pg. 11-14

Appendices Annotated Proposed Text Changes Pg. 15 Municipal Fiscal Impact Analysis Pg. 24 Relevant News Articles Pg. 53

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Brick and mortar retailers – especially in malls – face an increasingly uncertain future

Well before COVID-19 turned the world upside down, retailers were fighting to compete due to the dramatic increase in online shopping. E-commerce has already had major impacts on brick and mortar retailers, with record numbers of small and large retailers across the country closing or declaring bankruptcy. Unfortunately, the rise COVID-19 is compounding these challenges.

An estimated one quarter of malls across the country will close in the next three to five years.

More than half of department stores in America’s malls are expected to permanently close by 2021.

In 2019, retailers closed more than 9,000 stores, a 59% increase from the previous year.

Analysts estimate that 15,000 stores will close permanently in 2020, a number that could go even higher depending on the duration and impacts of COVID.

THE BOTTOM LINE: Unless mall owners and brick and mortar retailers can successfully evolve, many will disappear – as will the millions of dollars in tax revenues and thousands of jobs they provide.

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National Trends indicate A complicated Future For Malls And Retailers Across the Country

THE BOTTOM LINE: Today’s malls were built for yesterday’s consumers. Changing shopper behaviors, increased retailer bankruptcies and limited retailer expansion plans require mall owners to reimagine existing projects into 18-hour a day live, work, play, shop, dine, entertain places that serve tomorrow’s customers and the communities they where they reside.

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Connecticut Post is not immune to the unprecedented challenges FACING the retail industry

Since acquiring Connecticut Post in 2015, Centennial Real Estate has consistently invested in keeping the property’s retail and restaurant tenants fresh, adding national names as well as locally owned businesses.

The mall is already struggling with the ripple effects of national retail trends, with adverse outcomes right here in Milford.

Connecticut Post has experienced a 20% drop in visitors over the past five years.

While we constantly work to find new tenants, it is becoming increasing difficult to find tenants who want to locate in enclosed malls.

In fact, since 2017 alone, more than 25 permanent tenants have left Connecticut Post.

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The damaging effects of national retail trends threaten both Connecticut Post and its contributions to the City of Milford.

Declining numbers of shoppers and stores closing at a record-breaking pace mean reduced economic activity, increased job losses, and significantly reduced tax revenues in Milford.

Over the last 10 years, (2010 – 2019) the mall’s assessed value has dropped from $176,390,000 to $149,099,000.

Adjusted for inflation, the 2010 value of $176,390,000 is equal to $206,806,225 in 2019 dollars.

This means that in just the past 10 years the mall lost $57,707,225 in value, a 28% depreciation.

Malls are already failing in Connecticut, resulting in revenues evaporating for their communities.

Enfield Square Mall sold for $82,037,420 in 2006 and again for $11,392,500 in 2019, depreciating 86% in 14 years.

Enfield Square was assessed at $19,263,460 in 2017, then depreciated to $9,667,020 in 2019, a 50% drop in just two years.

COVID-19 will contribute to substantial further drops in retail property values at an increasingly rapid pace.

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Without new investment and a new approach, Connecticut Post’s property value will continue to decline, resulting in millions in lost taxes for Milford.

Based on the continued decline in brick and mortar retail & enclosed malls, it’s conservative to project that Connecticut Post will depreciate by an additional $57,707,225 over the next 10 years or $5,770,722 per year.

A depreciation of $5,770,722 per year equals a loss of $159,906 in tax revenue every year to Milford.

COVID-19 will speed up the decline in retail property values.

With COVID accelerating the evolution of the retail sector, it is plausible to project that Connecticut Post will depreciate $57,707,225 within the next 2-3 years.

That means Milford would face a loss of up to $1,599,067 per year in property tax revenue within three years.

THE BOTTOM LINE: The City of Milford is at risk of losing nearly $1.6 million in property tax revenue annually if Centennial cannot apply its proven approach to transforming underperforming retail real estate into a dominant mixed-use destination.

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COVID continues to have wide ranging impacts across retail, causing thousands of store closures and job losses.

Between January and June 2020, an estimated 3,600 companies have filed for bankruptcy, many of whom are retailers operating multiple locations. • JC Penney, which filed in May 2020 estimated that 154 of its stores will close their doors. • Vitamin retailer GNC filed in June 2020 and plans to close 1,200 of its stores.

While the year is not yet over, 2020 has already seen many high-profile retailers, restaurants and consumer service companies file for bankruptcy including:

• Lord & Taylor • JC Penney • Neiman Marcus • Hertz • Tuesday Morning • Chuck E Cheese • New York & Company • Gold’s Gym • Lane Bryant • California Pizza Kitchen • Sur La Table • Pier 1 Imports • Brooks Brothers • True Religion • Modell’s Sporting Goods • Lucky Brand • Tailored Brands (Men’s Wearhouse, Jos. A. Bank)

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Centennial’s vision: Invest for the short- and long-term success of the project and city, beginning with a luxury residential community.

Centennial is proposing a regulation amendment to facilitate a residential community located on the southeast corner of the mall's parking lot.

The conceptual residential community includes approximately:

• 135 one bedroom units • 135 two bedroom units • 30 three bedroom units

The residential community at The Post will expand housing options for Milford residents.

Examples of architectural design.

CREDIT PERKINS EASTMAN CREDIT ARROWSTREET CREDIT ARROWSTREET

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POTENTIAL FUTURE PHASE PUBLIC SPACE EXAMPLE

Centennial’s vision: Invest for the near- and long-term success of the mall starting with a luxury residential community.

Additional components of the mall will also be redeveloped in the future to transform the mall into a modern, mixed-use property.

Centennial looks forward to partnering with the city and other stakeholders to craft a shared vision, custom and unique to the property and the Milford community.

POTENTIAL FUTURE PHASE PUBLIC SPACE EXAMPLE – NIGHT VIEW

The Bottom Line: In order to craft a shared vision for the long- term future, Centennial must first stabilize the property in the near term with the addition of a vibrant, luxury residential community.

11 of a vibrant, luxury residential community.

A residential community at Connecticut Post Mall will bring significant economic benefits to Milford.

Contributing an estimated $1,215,244 in new combined real and personal property tax revenues to Milford each year, a 28% increase over the taxes currently paid.

Generating and/or sustaining an estimated 372 construction jobs

Generating and/or sustaining an estimated 117 permanent jobs in the region

Generating an estimated $34.8M in new wages with an increase of $1.2M in local consumer spending

The Bottom Line: A residential community at Connecticut Post will deliver millions in new revenues, and ensure the mall continues to be the City of Milford’s largest taxpayer.

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Residential is the most viable option to stabilize the mall and lay the groundwork for the future.

Centennial engaged Goman & York, a leading Connecticut real estate economic analysis firm to gather current data on prospective alternative uses at the property.

General Office

• Milford supply is outpacing demand with approx. 500,000 s.f. in commercial space for lease/sale, even considering COVID related relocations out of NYC. • Rents below $30 per sq. ft. = returns that do not justify new construction.

Under these current conditions, developers would not build office space in Milford. Medical Office

• There is an abundance of Medical Office space in Milford– approx. 34,000 s.f. listed for lease/sale. • Market rents – approx. $20/square foot make returns so low that construction costs exceed the return on rent.

Under these current conditions, developers would not build medical office space in Milford.

Hotel

• With several hotels and lodging options in a 10-20-mile radius of Milford, the investment would not generate a return. • Construction costs exceeds return on rent for hotels. • Hotel development is risky, which makes it challenging to attract investment.

Under these current conditions, developers would not build a hotel in Milford. Commercial/Industrial Flex Space

• There is nearly 450,000 square feet listed for lease or sale in the area. • With rents between $5.50 and $12.50 per s.f, the returns are too low to attract investment.

Under these current conditions, developers would not build Commercial/Industrial Flex Space in Milford.

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Alternative Commercial Uses

• Recreation (climbing wall, trampoline park, etc.) o Marginal uses where low rents = low return o Mid-Post COVID, these concepts are no longer as viable • Incubator Space o Lacks a workable business model o Little demand and existing local competition from Science Park o Marginal when not associated with a research institution • Co-Workspace o Short-term lease product with marginal success o Existing local competition from District New Haven o With COVID, no longer as viable

The Bottom Line: While many of these alternative uses may be attractive in a vacuum, a holistic look at the real estate market in Milford confirms these are not economically feasible at this time.

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Annotated Proposed Text Changes

THE CONNECTICUT POST LIMITED PARTNERSHIP 15

Annotated Proposed Text Changes September 8, 2020

The Connecticut Post Limited Partnership (“the Post”) has proposed various amendments to the SCD District standards as well as related parking and definitions relevant to its intended residential development on the former Sears Auto portion of the Post property. The rationale for each of these amendments is set forth below, noted in bold italics, to assist with understanding the need for these revisions.

ARTICLE III DISTRICT USE REGULATIONS

SECTION 3.9 SHOPPING CENTER DESIGN DISTRICT: SCD

3.9.1 Permitted Uses: All uses permitted in Shopping Center Design Districts shall be deemed to be Special Uses.

3.9.2 Special Uses: Subject to all other applicable provisions and limitations of these Regulations, the Board may permit the following buildings or uses, subject to Special Permit and Site Plan Approval in accordance with ARTICLE VII, herein.

3.9.2.1 Mixed uses containing allowable businesses, offices, and multi•family dwelling units subject to the limitations of Section 3.3 medium density multi-family residential districts (RMF-16); subject to the limitations of Section 3.9.4.3 herein, and provided that the minimum lot area utilized for multi• family dwelling units shall not be less than 20 4 acres.

3.9.2.2 Multi-Family Dwelling Units as provided and regulated in Section 3.3. medium density multi-family residential districts, subject to the limitations of Section 3.9.4.3, herein, and provided that the minimum lot area shall not be less than 20 4 acres.

The limitations on multi-family housing contained in the RMF-16 district are impractical for the type of residential development that would occur in the SCD District. Those regulations are consistent with a garden or townhouse style development within a more residential zone. In the mixed-use context of the Post property, residential design needs to be compatible with the surrounding larger commercial structures and wide variety of uses from restaurants to a theater.

The reduction in minimum acreage is designed to facilitate the residential development. For financing, tax, or other needs, the residential community may ultimately need to exist as a separate parcel, subject to the zoning approvals and requirements of the larger center (by way of example, Target is its own separate parcel). Recognition of this need is already embodied in Sec. 3.9.6.2 below, which contemplates possible parcel divisions. Establishing this minimum acreage will allow creation of the separate lot without the need for further regulatory changes.

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3.9.2.3 Offices for business, financial, professional or personal services or other similar offices.

3.9.2.4 Hotels or motels as provided and regulated in the Design Office District, Section 3.6.2.3.

3.9.2.5 A retail store containing at least 40,000 square feet of floor area.

3.9.2.6 A shopping center containing at least 60,000 square feet of floor area and containing stores for sale of goods at retail or for performance of personal services clearly subordinate and customarily incidental to retail sales.

3.9.2.7 Eating places subject to the provisions of Section 5.5 where applicable.

3.9.2.8 Restaurants with an outdoor customer dining area as defined in Section 11-2.

3.9.2.9 Sale of alcoholic liquor, subject to the applicable provisions of Section 5.5 herein.

3.9.2.10 Stores for sale of goods at wholesale.

3.9.2.11 Indoor places of entertainment, amusement, recreation or assembly such as theaters, billiard rooms, bowling alleys or other similar indoor uses. A public hearing shall be required for all uses designated in this subsection.

3.9.2.12 Dry cleaning or dyeing establishments using non-inflammable solvents; provided that the floor area shall not exceed 3,000 square feet per establishment, and subject to approval of the cleaning solvents by the Fire Department and approval of the method of waste disposal by the Departments of Public Works and Public Health.

3.9.2.13 Off-street parking garages or lots.

3.9.2.14 Accessory buildings or uses clearly subordinate and customarily incidental to and located on the same lot with any of the foregoing special uses shall be approved by the Board in the same manner as a Special Use.

3.9.2.15 A change in the use of interior space of an existing building in a Shopping Center Design District shall not require either an amendment to a Special Permit and/or Site Plan Approval, provided that such use is listed in Section 3.9.2 or Section 3.9.3, and further provided that no exterior structural changes to the existing building shall be made in connection with such changed use.

3.9.2.16 Extended stay hotels.

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3.9.2.17 Health centers or clubs provided that the maximum gross building area devoted to such health center or club use shall not exceed 41,000 square feet.

3.9.2.18 Other related or equivalent principal buildings or uses, which are not specifically listed and are not prohibited may be permitted by the Board by Special Exception in accordance with Section 7.3.

Requests for change of use to be considered under the provisions of this Section shall be in accordance with Section 8.8.2 Change of Use.

3.9.3 Accessory Uses: The following accessory uses shall be allowed:

3.9.3.1 Converting, altering, finishing, cleaning, assembly or other processing of products which is clearly subordinate and customarily incidental to a principal use and where goods so produced or processed are used or sold exclusively on the premises provided that the area used for such purposes shall be within a completely enclosed building.

3.9.3.2 Accessory vehicle repair and/or service garages, subject to the applicable provisions of Section 5.4 herein.

3.9.3.3 Accessory storage of equipment, merchandise, materials or supplies within completely enclosed buildings.

3.9.3.4 Other accessory buildings or uses which are clearly subordinate and customarily incidental to and located on the same lot with the principal use, and that will not be hazardous to the public health, safety and welfare.

3.9.3.5 Off-Street Parking and Loading: In accordance with Section 5.1, herein; except that off-street parking, loading and vehicular access areas shall be provided in the manner and to the extent determined by the Board to be adequate for any mixed-use building, notwithstanding the applicable provisions of Section 5.1.4, herein. Landscaping in parking areas shall conform with Article V, Section 5.14.

3.9.3.6 Signs: In accordance with Section 5.3 herein.

3.9.3.7 Recreational buildings and uses accessory to Multi-Family Dwelling Units, including swimming pool, clubhouse, and exercise facilities.

The purpose of this amendment is to expressly allow any accessory buildings or structures that serve the residential community. Given the preliminary nature of a residential design, this provides the flexibility to design an appropriate community and amenities.

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3.9.4 Lot and Building Requirements: Subject to all other applicable provisions and limitations of these Regulations, buildings and uses shall comply with all lot and building requirements as set forth herein.

3.9.4.1 Minimum Lot Requirements:

(1) Lot Area: (a) with dwelling units 20 4 acres (b) without dwelling units 10 acres (2) Lot Width: 300 feet (3) Lot Depth: 300 feet

The rationale for this revised lot minimum is noted above.

3.9.4.2 Minimum Yard and Open Space Requirements:

(1) Principal Uses: Front, side and rear yards for all principal uses shall not be less than 50 feet.

(2) Accessory Uses: Front, side and rear yards for all accessory uses, exclusive of signs, shall not be less than 25 feet.

(3) Buffer Strip: At least 10 feet adjacent to any Residential District for the first 50 required off-street parking spaces or any portion thereof, plus an additional 10 feet of buffer strip adjacent to any Residential District for each additional 50 required off-street parking spaces, or major fraction thereof, up to a maximum of 100 feet of buffer strip. The planting shall conform with Article V Section 5.14.

3.9.4.3 Building Requirements:

(1) Design: Buildings shall be designed in such a manner as to be compatible with the lot and in harmony with the general character and appearance of the surrounding neighborhood.

(2) Length: Buildings shall not be of such unreasonable length as to adversely affect the general character and appearance of the surrounding neighborhood.

(3) Height: No building or structure shall exceed 10 stories or 120 feet in height; except that multi-family dwelling units shall comply with the applicable height provisions for RMF 16 Residential Districts not exceed 5 stories or 85 feet in height.

As with the other RMF-16 standards, the existing height limitation is impractical for this context given the existing development. The proposed height limitation is suitable for a residential building in a mixed-use setting. It remains well below the overall height limit and is consistent with the surrounding “neighborhood” on the Post property.

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(4) Spacing: Group buildings on a single lot shall be so arranged that the minimum distance between principal and/or accessory buildings shall be equal to or greater than one-third the sum of the heights of the affected taller building; exclusive of parking structures which are designed to function in conjunction with a principal building.

This amendment clarifies the intent of the regulation – to ensure a minimum spacing of one-third the height of the taller building. The existing language’s use of “affected” creates ambiguity as to which building is the one to be used for the one-third calculation.

(5) Building Area: A maximum of 50 percent or less as required by off-street parking and loading regulations.

(6) Floor Area Ratio: A maximum of 1.5 FAR, exclusive of accessory parking garages and structures.

(7) Dwelling Units/Business Floor Area: Where multi-family dwelling units are proposed, a maximum of 40 percent of the aggregate floor area, exclusive of accessory parking and loading garage and structures, shall be used for dwelling purposes and a minimum to 50% shall be used for business and/or office uses.

This regulation is unnecessary given the proposed cap on the number of residential units in the zone as noted below.

(8) (7) Dwelling Units: The maximum number of units within the zone shall be 300. Where dwelling units are proposed not to be part of a mixed-use development, density shall be allowed within the following limitations: a medium density of 16 to 24 bedrooms per acre; multi•family residential shall be allowed within buildings or structures of 3 or less stories or a height of 35 feet. Increased densities are subject to Planning and Zoning Board review of building and site design to include roof style screening of mechanical equipment, facade treatments, minimum re-grading and/or changes to topography, sign designs and location, underground utilities, on site lighting and design and landscape and grading design of the site.

Because any residential development will create a mixed-use development on the Post property, the existing language is no longer necessary. The maximum unit count is consistent with the densities contained in the existing regulation, which could result in 300 or more units on the minimum 20 acre parcel (e.g. 24 bedrooms per acre x 20 acres = 480 bedrooms). The maximum is included to avoid concerns about additional residential development within the zone, which only includes three properties – the Post and the two adjacent parcels where Stop & Shop and Walmart are located. Any residential development in the SCD zone beyond 300 units would require further amendments to the Zoning Regulations, thereby invoking this Commission’ legislative discretion.

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The provisions shall not be constructed to allow a greater density than is otherwise allowable within the limitations of Section 3.9.2.2, herein.

3.9.5 Prohibited Uses: The following uses shall be expressly prohibited:

3.9.5.1 No display of goods outdoors, exclusive of nursery stock, shall be permitted except in courts or malls.

3.9.5.2 No retail sales outdoors, from open counters, or with curb service shall be permitted; except for seasonal sidewalk sales.

3.9.5.3 No drive-in establishment shall be permitted; except for drive-in banks.

3.9.5.4 No commercial garage, gasoline station, vehicle repair and/or service garage, vehicle dealership, vehicle washing establishment, or other similar use shall be permitted; except for one accessory gasoline station per lot, and for one accessory vehicle repair and/or service garage per lot.

3.9.5.5 No parking or loading area shall be used for the storage of new or used vehicles for sale or hire or for the storage of unregistered vehicles.

3.9.5.6 No warehouse or storage; junk yard; or outside storage yards shall be permitted.

3.9.5.7 No trucking terminal facilities for handling freight or material with or without maintenance facilities shall be permitted; except for clearly subordinate and customarily incidental delivery departments or off-street loading facilities operated by business concerns for their own use.

3.9.5.8 No principal manufacturing, fabricating, assembling or processing of goods or products shall be permitted.

3.9.5.9 Any building or use which will not comply with the Performance Standards of Section 5.11 shall be prohibited.

3.9.6 Modification of Requirements:

3.9.6.1 Reserved for future use.

3.9.6.2 A development site may be subdivided for separate sale of the components of a plan approved under this Section, provided the overall development complies with these Regulations. Any such subdivision shall be in accordance with the provisions of the Subdivision Regulations of the City of Milford. That, in the event of the foregoing, any subdivision for separate sale of a development site shall be deemed to meet the requirements of these Regulations if the overall development complies with these Regulations.

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ARTICLE V SUPPLEMENTARY REGULATIONS

SECTION 5.1 PARKING AND LOADING REGULATIONS

Figure 4: Minimum Off-Street Parking Requirements

5.1.4 Off-Street Parking Requirements

Figure 4: Minimum Off-Street Parking Requirements

Type of Building or Use Minimum Required Parking Spaces

(3) Multiple Family Dwellings (a) Efficiency bedroom units 2 space minimum per dwelling unit (1-1.5 in MCDD, CDD-1 and CDD-2) (b) One bedroom unit 2 space minimum per dwelling unit (1.5-2 in MCDD, CDD-1 and CDD-2) (c) Two bedroom units 3 space minimum per dwelling unit (2-2.5 in MCDD, CDD-1 and CDD-2) (d) Three bedroom units 3 space minimum per dwelling unit (2-2.5 in MCDD and CDD-2) (e) Efficiency – three-bedroom units 1.5 space minimum per dwelling unit in SCDD

With the recent increase in multi-family development across the country, parking demand in those communities has become well-settled. This regulation ensures adequate parking for the community, but without minimums that exceed demand and cause unneeded impervious surface, particularly in light of the readily available parking on the Post property. Additionally, the residential development may need to stand as a separate parcel and creation of a standard provides clarity in the event a subdivision becomes necessary.

Type of Building or Use Minimum Required Parking Spaces

(24) Regional Shopping Malls 1 space for each 250 sq. ft. of gross buildable 3 spaces for each 1,000 sq. ft. of leasable area. Storage areas of more than 10,000 sq. ft. per store unit shall not be included in the parking calculations and shall be a deduction from gross buildable leasable area.

As described in the Parking Utilization Study prepared by BL Companies, parking on the Post property is already well more than adequate. At its holiday peak, available parking is not more

7 than 69% utilized, with that percentage achieved only during one limited window, with other times peaking at 60% utilization. Modifying the parking requirement ensures that the required parking corresponds with the actual need on-site, thereby minimizing unnecessary impervious surface.

ARTICLE XI DEFINITIONS

SECTION 11.2 OTHER TERMS

GROSS LEASABLE AREA – The total enclosed floor area designed for the exclusive use and occupancy by all tenants including basements, mezzanines, and upper floors as measured from the center line of joint partitions, from the lease line at common areas, and from outside wall faces.

This amended definition clarifies the area for which parking must be provided. General industry standards do not require parking for shared common areas – such as hallways and center court – because those areas do not generate a demand on parking. The proposed definition reflects not only decades of experience with regional shopping malls but also common sense to minimize excessive parking requirements.

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Municipal Fiscal Impact Analysis

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Connecticut Post Mall Proposed 300-Unit Multi-Family Development

Municipal Fiscal Impact Analysis: for the Milford Planning and Zoning Board

June 26, 2020

Prepared by: Donald J. Poland, PhD, AICP Managing Director, Urban Planning & Strategy Goman + York Property Advisors, LLC 1137 Main Street East Hartford, CT 06108 Phone: 860-655-6897 E-mail: [email protected] www.gomanyork.com

DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

June 26, 2020 Jim Quish, Chair Town of Milford Planning & Zoning Board 70 West River Street Milford, CT 06460

RE: Connecticut Post Mall – Application to Amend the Milford Zoning Regulations (“Regulations”)

Dear Chairman Quish: I submit this report as expert testimony and supportive material for the Connecticut Post Mall application to amend the Shopping Center Design District (“SCDD”) regulations. The SCDD regulations currently permit a multi-family residential community, but only in a format that does not reflect the needs, desires, or expectations of the current multi-family rental market. As I am sure you are aware, the retail sector is being disrupted by advances in technology, the increasing popularity of ecommerce, and shifts and changes in consumer shopping and spending behaviors. While these changes are impacting most segments of the retail industry, the large, regional, enclosed malls have been harmed the most. In past decades, headlines touted the Malling of America. Today, headlines claim a Retail Apocalypse. A recent Business Insider1 article estimates that up to 25% of the remaining malls (hundreds have already closed) will shutter by 2022. The fact is few malls will survive as traditional enclosed malls. Malls that do survive will be those that innovate, adapt, and become hybrid spaces that combine retailing with entertainment, residential, offices, and other uses— become mixed use developments. This report will explore these changes and challenges to the retail sector and malls—the issue at the core of this application—and provide a municipal fiscal impact analysis of the proposed residential development on the Post Mall site. Most important and unlike other malls, the ownership of Connecticut Post Mall are committed to innovating and adapting the mall to ensure its continued existence and substantial contribution to the City of Milford. Thank you for your time and consideration of this application. I will be available at the public hearing to answer any questions and address any concerns you or other members of the Commission may have. Respectfully submitted,

Donald J. Poland, PhD, AICP

1 50 Haunting Photos of Abandoned Shopping Malls Across America, Business Insider, Nov. 8, 2019 by Mary Hanbury. See also, The demise of America’s malls can deal a blow to the towns that depend on them, CNBC, June 20, 2020 by Lauren Thomas.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Town of Milford – Planning & Zoning Board Summary of Findings: Municipal Fiscal Impacts March 26, 2020

Revenues: Real Property Taxes & User Fees Real Property Taxes (300 Multi-Family Residential Units) = $1,101,772 Personal Property Taxes (450 Motor Vehicles at $252/vehicle/year) = $113,472 Sewer User Fees ($328.80/unit/year) = $98,640 Estimated Projection – Total Taxes & Fees = $1,313,884

Expenditures: School Enrollment Projections & Cost2 Total Enrollments (0.24 multiplier per unit = 72 enrollments)3 = Enrollment Expenditures (36 NTD Enrollments @ $10,855/Enrollment/Year)4 = -$390,200

Expenditures: Municipal Government Total Expenditures – General Government (23.1% of revenue)5 = -$280,710 -$670,910 Fiscal Impact Summary Total Revenue (Property Taxes & Fees) = $1,313,884 Total Expenditures – (Education & General Government) = -$670,910 Estimated Positive Fiscal Impact/Year = $642,974

One-Time Development Fees Land Use Permitting Fees6 = $6,855 Building Permitting Fees7 = $11,670 Sewer Connection Fees ($25/unit)8 = $7,500 Estimated One-Time Development Fees = $26,025

2 Milford’s housing stock consists of 23,571 housing units, of which 21,634 units are occupied. Owner-occupied housing accounts for 76.4%, of which 74.3% are single-family, and 59.6% of the housing stock has 3+ bedrooms. With 5,566 student enrollments in the school district, Milford’s housing stock generates 0.24 enrollments per housing unit (and 0.26 per household or occupied housing unit). 3 Projected enrollments from the 300 proposed multi-family apartments units equal 72 or 0.24 enrollments per unit. 4 Per pupil enrollment costs are adjusted for non-property tax education revenue and allocated expenses to account for fixed cost in the Milford BOE budget that generally are not impacted by changes in enrollments (i.e. utilities, maintenance, administration, etc.). 5 General Government expenditures estimate the percent value of government services (23.1% total revenues) utilized by the proposed multi-family units. This 23.1% accounts for general government services less the commercial and industrial portions of the grand list and the BOE expenditures that are captured in Education Expenditures. 6 Land Use Fees include Zoning Permits ($95), Special Permit Application ($510), Public Hearing fee ($250), and Plan Review fee ($20/unit). 7 Building permit fees are calculated $20 per $1,000 of the first $1,000 in construction costs and $18 per $1,000 for additional construction costs. Fees also include Certificate of Occupancy ($20/unit). 8 The Sewer Connection Fee is $25 per unit.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

City of Milford – Planning & Zoning Board Connecticut Post Mall – Municipal Fiscal Impact Analysis

I. Introduction The proposal before the Planning and Zoning Board is for an amendment to the SCDD regulations in order to permit the construction of a 300-unit multi-family housing development on the site of the Connecticut Post Mall. The Mall site is located at the intersection of Route 1 (Boston Post Road) and Interstate I-95 (Exit 39) and consists of 74.86 acres with 8 buildings totaling 1,752,680 square feet of retail space. First developed in 1960 and enclosed in 1981, the Connecticut Post Mall has functioned as a regional mall, anchoring the area, and attracting substantial surrounding retail development. For more than a decade, the Post Mall has been Milford’s largest taxpayer. The aim of this report is to provide the Milford Planning and Zoning Board with an analysis of the municipal fiscal impacts associated with the proposed multi-family housing development. As shown on the Summary of Findings page above, the proposed 300-units of multi-family housing will result in a positive fiscal impact of up to $642,974 in net-positive tax revenue each year—ensuring that the Connecticut Post Mall remains Milford’s largest taxpayer and that the housing units do not create a fiscal burden on the City of Milford municipal services. While the positive fiscal impact is important, understanding the demographic, social, economic, and generational changes that are underlying the positive fiscal impact are even more important. To best understand these changes, we first need to understand that cities (towns, suburbs, and urban areas) are complex adaptive systems—socio-economic ecosystems—that are constantly shifting, changing, and reorganizing around new social, behavioral, economic, and technological forces. Therefore, this report begins with a discussion of these changes and how such forces impact land use planning. To accomplish this, the report explores the changing landscape of retail, demographics, housing, and how these changes are impacting Milford, especially Milford’s declining school district enrollments. This will help us understand the importance of adaptation and the need not to resist, but to embrace and manage change.9

9 For a detailed account of urban ecology, changes in suburban communities (including commercial centers and retail), and the need to embrace and manage change, see Poland, Donald; (2016) Urban Resilience - Evolution, Co-Creation, and the Remaking of Space. Doctoral Thesis, UCL (University College London).

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

II. The Changing Landscape of Retail The form and function of our settlement patterns are forever changing around technological and transportation innovations, economics, and our social-cultural ways of living in our environment. For example, our first industrial mills and factories were located alongside rivers (their source of power) and towns and cities were constructed around them. Riverside locations were later abandoned once electricity was invented and electric power sources provided. The arrival of rail resulted in the abandonment of many ports, as manufacturing relocated along the rail lines. Later, interstate highways further transformed and reorganized the location and site of industry at interchanges and access ramps (i.e. the industrial park) and large single-story buildings that consolidated production, assembly, and distribution on a single floor. The same is true of retailing. The location, building forms, and space of retail has also been continually shifting and changing around technological and transportation innovations, economics, and our social- cultural ways of living in our environment (including the ways in which we shop). In the early to mid- 1900s the primary location of retail was in city centers (i.e. downtown and main street) and multi-story department stores. Over time department stores (and other retailers) shifted outward to suburban centers and retail strips. Later, the enclosed American mall came into vogue, located miles outside the central city, downtowns, and suburban centers, at interstate highway interchanges and access ramps, and anchored by large single- and two-story department stores. Next, the big box discount department stores and specialty retailers (i.e. category-killers) emerged on the scene, often favoring locations proximate to malls and other retail clusters. Just as the mill towns and industrial cities struggled with the changing location of manufacturing, the downtowns, main streets, and suburban centers struggled with the changing location of retailing.10 Today, with the arrival of ecommerce, the retail sector continues to change. However, the arrival of ecommerce retailing is not simply a spatial shift in the physical location of retail, it is a shift to a virtual space that captures market share, while rendering physical locations and physical spaces of retailing functionally obsolete. For example, when retailing moved from main street to malls, new uses and certain forms of retailing, such as personal service and hospitality (i.e. restaurants) discovered new opportunities on main street, backfilling into abandoned spaces, and creating new vitality on many main streets and in town centers. With the shift to the virtual space of ecommerce, there is no longer enough demand for physical space (bricks and mortar retail) to backfill in downtowns, town centers, main streets, retail strips, and most notably, enclosed regional malls. Many of the past locations and spaces of retail are being rendered functionally obsolescent.

10 It is important to note that during this century-long change in the spatial location and organization of retailing, the retail sector itself was also transformed from the tailor-made, local, and individualized product to off-the-rack mass-produced products provided by global commodity chains.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

This shift from the spatial location and physical space of past retail to the virtual space of ecommerce and the industrial location and space of fulfilment and distribution centers is at the core of the new media accounts of the ‘retail apocalypse’ and ‘dead and dying malls.’ While such media accounts may over-dramatize the collapse of bricks-and-mortar retail (and retailers), there are many truths to the apocalypse and the struggles of the changing landscape of retailing. The fact, the landscape of retail has changed and will continuing to change. Retailing as we once knew it is being disrupted and transformed by technological and transportation innovations, economics, and the ever-changing behaviors of consumers. Simply put, consumers no longer shop and spend in the same ways as we did one or more decades ago. The retailers most harmed by these changes are the consumer electronics, apparel, books, and department stores (among others). Unfortunately for malls, retail apparel and department stores have been the lifeblood and anchors of malls. The Connecticut Post Mall is an illustrative example of the impact of these general trends in the retail industry and malls. For example, ecommerce, the aging of the Baby Boomers, the different priorities of the Millennials, and the over building of retail collectively have had a substantial impact on the enclosed mall retail distribution channel model. The impact is so dramatic, that various retail industry reports and experts estimate that between 25% and 50% of the existing enclosed malls will no longer be economically sustainable in the coming years. Bricks-and-mortar retail, including enclosed malls, will not cease to exist. Those that can and do innovate will find their place and persist. However, the future of retail remains uncertain, the struggle to innovate and persist are real, and the retail industry will remain subject to continued forces of disruption—technological advance in artificial intelligence and even autonomous auto-mobility will further challenge the retail industry. Many retail locations, sites, stores, and malls will collapse and be defined by vacancy, abandonment, and ultimately blight. Others will innovate, adapt, and shape-shift into new hybrid forms and functions that comingle similar, related, and compatible uses into new kinds of spaces and lifestyle experiences. Adaptation and hybrids are at the core our American entrepreneurial culture and by paying close attention to and giving “special sensitivity to marginal, neighboring, or occluded practices” we “generate the art, not science, of invention.”11 The owners of the Connecticut Post Mall are seeking to innovate—to adapt and find new hybrid forms to (re)position the Post Mall site to remain economically and socially viable and sustainable. In fact, the Post Mall ownership have done better than most in sustaining the malls occupancy as new tenants have been found to fill the spaces of past anchors and other tenant spaces. However, the universe of new retail tenants and opportunities to sustain occupancy is growing more challenging as store closing and bankruptcies continue to plague the retail industry. The writing is on the wall, given enough time, regardless of best efforts by the ownership, vacancies will increase, eroding the economic vitality and viability of the Post Mall—eroding Milford’s tax base. This threat is echoed in The demise of America’s

11 See Spinosa, Charles, Flores, Frenando, and Dryfus, Hubert, L., (1997): Disclosing New Worlds: Entrepreneurship, Democratic Action, and the Cultivation of Solidarity. The MIT Press. Cambridge, MA. (P. 30).

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com malls can deal a blow to the towns that depend on them. The article explains, “the coronavirus pandemic is speeding up the demise of America’s struggling shopping malls, which could deal a devasting blow to towns that depend on them.”12 During the collapse of the industrial economy and manufacturing sector, we did not have a crystal ball to see the future of industrial dereliction that would come. However, the collapse of our industrial economy and the abandonment and blight of industrial sites provides a window into the future of retail sites. Industrial decline helped us learn, taught us lessons, and provides us with the knowledge and understanding that complacency, resistance to change, and efforts to maintain and sustain the status quo do not work. The forces that drove industrial decline were more powerful than our ability to overcome the decline. The same is true of the forces that are driving the retail apocalypse. If we are complacent, resist change, or seek to maintain the status quo of retail, we will repeat our failures of the industrial past. From the perspective of community planning, the challenge is not to resist change, but to embrace and manage change.13 Adaptation is the foundation to resilience. Foresight and intentional action are the remedies to complacency and uncertainty. The abandoned sites of our industrial past were in less favorably locations and far less adaptable to new uses than our modern retail sites, structures, and locations.14 In fact, many retail sites, structures, and locations are adaptable and well-positioned to be transformed—this is especially true of the Post Mall site. However, to successfully adapt and reposition these sites requires intentional action. Those who act now—will stay ahead of the collapsing retail- wave that will erode malls into functional obsolescence—to find new hybrid forms and functions are the most likely to succeed. “New products and…services are generated…by knowledge, imagination, innovation, risk, trial and effort…”15 and who are first to “innovate and is lucky will take the market.”16 This application, to amend the SCDD regulations to facilitate a 300 unit multi-family community on the Connecticut Post Mall site is an intentional and proactive step by the Mall ownership to adapt the property to the ever-changing and challenging retail landscape, to create diversity in use and revenue aimed at creating resiliency. The Post Mall ownership is seeking to innovate, to create a hybrid site of retail and residences—compatible uses that are mutually beneficial. Entrepreneurial spirit and efforts are always constrained by governance structures. However, government can also be entrepreneurial, especially local land use planning, a practice and profession that is seeking to move a community

12 The demise of America’s malls can deal a blow to the towns that depend on them, CNBC, June 20, 2020 by Lauren Thomas. 13 Walker, Brian, and Salt, David, (2006): Resilience Thinking: Sustaining Ecosystems and People in a Changing World. Island Press. Washington, D.C. Walker, Brian, and Salt, David, (2012): Resilience Practice: Building Capacity to Absorb Disturbance and Maintain Function. Island Press. Washington, D.C. 14 Note, industrial sites are further burdened by the challenges of environmental contamination and cost of remediation. 15 Deming, W. Edwards, (1984): Out of the Crisis, The MIT Press. Cambridge, MA. (P. 182.) 16 Deming, W. Edwards, (1993): The New Economics: For Industry, Government, Education. Second Edition, The MIT Press. Cambridge, MA. (P. 10).

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com forward and into the future.17 The Milford Planning and Zoning Board can be entrepreneurial and innovative, embracing and managing change by working with the Post Mall ownership to adapt to change and (re)position the Post Mall site as a hybrid space that can and will compete for investment. In fact, there is a symbiotic relationship between retail and housing—retail needs households and households need retail. This is one of the reasons why mixed-use developments have become so common. Allowing residential housing and retail to share the same site provides mutual benefits to both uses.

III. Demographics, Housing, and School District Enrollments Connecticut has been a slow-to-no-growth state for three decades. Job growth has been stagnant and population growth has been anemic. This lack of statewide economic and demographic growth has resulted in changes to Connecticut’s demographics and demographic structure. Unfortunately, these changes are for the worse. It is often said that demographics are destiny. In the case of Connecticut and its communities (including, Milford), the primary outcome of our demographic destiny is that we are aging—growing older. Older populations require more government services, need to be supported by a contracting labor force, and result in fewer young families with children—further reducing the next generation of our labor force. One of the most notable community concerns related to any proposal for new residential housing development is the impact of housing on municipal budgets resulting from new public-school age children generated by new housing units and enrolled in the local school district. This fiscal concern results from the fact that the largest portion of any municipal budget is the Board of Education budget—typically between 55% and 65% of the total municipal budget. In Milford, the Board of Education budget represents 56.9% of the total municipal budget. However, and unfortunately, assumptions related to the number of public school-age children generated by new housing units are higher than the actual number of school district enrollments that result from new housing. For example, it is not uncommon for persons or commissions to assume that each new housing unit produces one, two, or even more school district enrollments. These assumptions result from past experiences, memories of prior generations, and failure to understand that the same social-cultural forces that are contributing to the disruption of retail are also disrupting our communities, government services, and school district enrollments.

17 Many Connecticut communities with malls are innovating and view residential development as a promising and viable use for struggling mall sites. For example, the Enfield Square Mall “plans to add housing to the site” and Town officials are working with the owners (see Shopping mall already facing a rough road in an online world, but the coronavirus pandemic made it even rockier, Hartford Courant, June 22, 2020 by Kenneth R. Gosselin). Another example, a Town official from the Town of Manchester contacted Mike Goman and Don Poland of Goman+York Property Advisors on June 3, 2020 to inform them he reached out to the mall’s ownership regarding the potential for multi-family development (already allowed in zoning) on the Buckland Hills Mall site and for Goman+York to spread the word of this opportunity to potential developers.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Changes in demographics and generational changes to lifestyle are resulting in fewer traditional households and fewer school age children (school district enrollments). For example, some simple calculations can dispel the myth of one or more school enrollment per housing unit. Statewide, Connecticut has 530,612 children enrolled in public schools18 and 1,354,713 households.19 Divide statewide enrollments (530,612) by households (1,354,713) and number of public-school district enrollments equals 0.39 enrollments per household (or occupied housing unit). The same calculation can be applied to Milford. Milford has 21,634 households (occupied housing units) and 5,56620 school enrollments (5,566 / 21,634) or 0.26 school district enrollments per household. Enrollments of 0.39 per household statewide and 0.26 per household in Milford are well below the one or more enrollments per new housing units that is commonly assumed. What is most interesting and more important to understand is that enrollments have been declining for over a decade. In 2008 statewide enrollments were 574,848 compared to 530,612 in 2019 (a loss of 44,236 school district enrollments). In 2008, Milford’s school district enrollments were 7,400 compared to 5,566 in 2020 (a loss of 1,834 school district enrollments or a 24.8% decline). The disconnect between perceived enrollments and actual enrollments, and the declining enrollments, should cause us to pause, think, and ask questions. For example, why are actual enrollments per household so low? Or, why are school enrollments declining? The answers to these questions are found in our demographics, specifically the changes in the demographic structure of our population.21

Demographics and Demographic Structure Before discussing the specifics of demographics, it needs to be stated that the total number of housing units in a community (and proposed new housing units) do play a role in public school enrollments. That is to say, the more housing units a community has, the more capacity a community will have for school-age children. However, the total number of housing units, existing or proposed, are not a primary driver of school district enrollments. School district enrollments are driven more by demographics and the demographic structure (i.e. age, persons per household, married couples/families, etc.) of the population. For example, what this means is that housing units (and the number of bedrooms within housing units) are simply vessels that can and may house school-age children—but there is no guarantee they will. More important, demographics and demographic structure as the driver, for example, means that as a population grows older, the number of births (the total fertility rate) and resultant number of children decrease. Decreasing number of children overall

18 Connecticut State Department of Education, www.http://edsight.ct.gov (2020). 19 United States Census, American Fact Finder, www. https://factfinder.census.gov (2017). 20 Milford Board of Education, Proposed Budget 2020 – 2021. 21 These changes in demographics and demographic structure are also contributing to the changes in retail and shopping behavior of consumers. For example, fewer family-households and fewer children per household, result in fewer apparel purchases for children—growing children who may need new cloths each year.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com typically results in declining school enrollments. Declining fertility rates are the primary driver of low and declining school district enrollments.22 The total fertility rate is the average number of children that would be born by a woman if all women lived to the end of their childbearing years. Since only women have children, and since all women do not live to the end of their childbearing years, the replacement level of the fertility rate is between 2.1 and 2.3 (births per women) to maintain a stable populations—higher rates result in population growth and lower rates result in population decline. Another way of understanding this is to understand how the fertility rate relates to the death rate. The equation for population growth (not including immigration and migration) is births plus deaths equals growth. If births are higher than deaths, the population grows. If births are lower than deaths, the population declines. Table 1. below shows how the fertility rate translates deaths to births. Note that the United States fertility rates is 1.73 and Connecticut’s fertility rate is 1.57. That means, in Connecticut, 27 fewer persons are born for every 100 persons who die. Excluding immigration and migration, given enough time at a 1.57 fertility rate, Connecticut’s population will decline to zero. Table 1. Median Age Fertility Rate Deaths Births Replacement Rate Above Replacement 2.4 100 120 +5 Births = Growth Replacement 2.3 100 115 Stable Replacement 2.2 100 110 Stable Replacement – USA 2.1 100 105 Stable Below Replacement 2.0 100 100 Decline United States 1.73 100 82 -18 Births = Decline Connecticut23 1.57 100 73 -27 Births = Decline Declining fertility rates, nationally and in Connecticut, are not simply the result of an aging population. Declining fertility rates are also tied to, and the result of, increased economic opportunity (wealth), greater education, and the associated changes social-cultural behaviors that come with wealth and education.24 Most important, these structural changes in our demographics can be traced across generations. For example, if you are of the Baby-Boom generation (born between 1946 and 1964),25 it likely that you have more siblings than you have children. It is also more likely, as a Baby Boomer, you moved out of your parent’s home, got married, and had your first child at a younger age than those in Generation X (born between 1965 and 1980) and the Millennial Generation (born between 1981 and 1996). These slow-moving changes in the way-we-live and behave are often hard to notice in real time. However, by studying demographics and social behaviors over time (generation by generation), the

22 PEW Research Center, 2018. The US Total Fertility Rate—lifetime births per women—has declined from 3.6 in 1960 to 1.73 in 2018. 23 www. https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_fertility_rate 24 For example, prioritizing career over childrearing. 25 PEW Research Center, 2018.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com changes become noticeable and their collective impacts can be profound. These changes (and other demographic and social changes) are why Milford’s school district enrollments are substantially declining. Milford is an aging community. In 2000, Milford’s median age was 39.4, increasing to 43.5 in 2010, and in 2017 the median age increased to 44.8—well above the national and state median age (Table2).26 In short, older populations have fewer children, resulting in fewer school enrollments. In addition, older households spend less on goods and services—spend less in retail establishments. Table 2. Median Age USA CT Milford 2017 37.8 40.8 44.8 2010 37.2 40.0 43.5 2000 35.3 37.4 39.4 Milford’s demographic structure over the past three decades has been transformed by the increasing age of the population. In addition, changes in demographic and socioeconomics have transformed household structure. For example, in 1960 only 13.0% of housing units in the United States were occupied by 1-person households. Today, 28% of our nation’s housing stock are occupied by 1-person households.27 The same is true in Milford. Today, 29.6% of Milford’s housing stock is occupied by 1- person households.28 Also notable, 43.7% of Milford’s renter-occupied housing units are 1-person households—that means that 43.7% of rental housing is not producing any school age children or school district enrollments. Another important change can be seen in married-couple households with children (under the age 18). In the United States, from 1970 to 2012, the percent of married-couple households with children declined from 40.3% to 19.6%. Milford is similar. The total family-households with children (under the age of 18) in Milford account for only 24.2% of households. These changes in household structure result from both an aging population and social-cultural trends. Today, compared to decades and generations before, we marry later, marry less, and have fewer children—the answers to Milford’s declining school district enrollments. What is most important and often missed in concerns over new housing the potential for more school age children and increased school district enrollments, is the benefits that young households and children provide to a community. In fact, no community should be pleased about declining school district enrolments or working to restrict young households—young families—from their community. What would a community be without children? How can we even have community without children?

26 All housing, demographic, and socio-economic data provided in this report are sourced from U.S. Census, American Fact Finder (2017) or the U.S. Census 2000 and 2010, unless otherwise noted. 27 United States Census, American Fact Finder, www. https://factfinder.census.gov (2017). 28 United States Census, American Fact Finder, www. https://factfinder.census.gov (2017).

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Children and young families are at the core of community. Little league sports, Girl and Boy Scouts, school talent programs, high school sports, and local parades and celebrations. While this may sound cliché, children are our future. As important, young families, especially renters, are the households that will be the purchasers of existing owner-occupied single-family housing. Without younger households, demand for housing (especially existing housing) will decline, as will property value. Milford, if it wants to remain socially and economically viable, must embrace younger households, families, young children, and school enrollments—the community’s future generations. Housing Characteristics The hard to notice slow-moving changes in demographics and demographic structure also impact housing and the housing market. Milford has 23,571 housing units, of which 21,634 (91.8%) housing units are occupied.29 Milford’s housing stock is 76.4% owner-occupied, 74.3% single-family (detached units equal 68.0% and attached units equal 6.3%), and 59.6% of the housing stock has 3- or more- bedrooms per units (Table 3).30 Owner-occupied housing is typically larger and has more bedrooms than renter-occupied housing. For example, in Connecticut only 5.9% and in Milford 5.4% of renter-occupied housing has four or more bedrooms.31 Most important to understand, it is the larger housing unit size and the housing units with the most bedrooms per unit are more appealing and desirable to families with children. This is the very reason why it should not be a surprise that owner-occupied households have more occupants per unit than renter occupied households. For example, Milford’s owner-occupied housing averages 2.59 persons per unit compared to 2.09 persons per renter-occupied housing unit.32 Simply put, with a 76.4% homeownership rate, 74.3% of the housing stock as single-family, and 59.3% of housing units having 3- or more-bedrooms, Milford’s housing stock has historically favored family-households with children. Today, traditional families and large families with many children are in decline. Table 3. Milford Housing by Bedrooms Bedrooms Units Percent No bedrooms 561 2.4% 1 bedroom 3,186 13.5% 2 bedrooms 5,770 24.5% 3 bedrooms 9,313 39.5% 4 bedrooms 3,946 16.7% 5 or more bedrooms 795 3.4% Source: U.S. Census, American Fact Finder 2017

29 United States Census, American Fact Finder, www. https://factfinder.census.gov (2017). 30 United States Census, American Fact Finder, www. https://factfinder.census.gov (2017). 31 United States Census, American Fact Finder, www. https://factfinder.census.gov (2017). 32 Statewide, Connecticut’s owner-occupied households average 2.67 persons and renter occupied households average 2.32 persons. United States Census, American Fact Finder, www. https://factfinder.census.gov (2017).

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

School District Enrollments The structural changes to Milford’s demographics—specifically median age and household size—are further evidenced when comparing Milford’s recent new housing development and its decade long decline in school district enrollments. For example, from 2008 to 2019 a total of 2,134 new housing units were constructed in Milford for a net gain of 1,926 housing units (after demolitions).33 During that same period, Milford’s school district enrollments declined from 7,400 to 5,566 enrollments (see Table 4.).34 That is a loss of 1,834 enrollments (a 24.8% decline). To put it another way, for every new housing unit added 2008 to 2018, Milford’s school district loss 0.95 enrollments per new housing unit. Table 4. Milford: New Housing Vs Enrollments New Total Total Net Unit School District Permits Units Demos Gain Enrollments 2021 n/a n/a n/a 5,502 2020 n/a n/a n/a 5,566 2019 140 n/a 140 5,635 2018 169 n/a 169 5,792 2017 194 24 170 5,926 2016 178 33 145 6,152 2015 358 0 358 6,278 2014 217 38 179 6,434 2013 189 0 189 6,670 2012 145 30 115 6,836 2011 96 43 53 6,988 2010 96 0 96 7,147 2009 86 20 66 7,326 2008 266 20 246 7,400 Total 2,134 208 1,926 -1,834 This simple comparison of new housing construction to school district enrollments (Table 4) highlights the power of demographic change—the force of demographic structure (i.e. an aging population) over housing production. It also demonstrates that new housing development and new housing units are not a primary driver of school district enrollments. It is also important to note and understand that school district enrollments are not a primary driver of local school board education costs. For example,

33 Connecticut State Department of Community and Economic Development: www.https://portal.ct.gov/DECD/Content/About_DECD/Research-and-Publications/01_Access-Research/Exports-and- Housing-and-Income-Data. It is important to note, especially if persons and commission members assume that multi-family housing drives school district enrollments. The fact is, only 16% of the new housing units constructed since 2008 were single-family detached. 84% of the new units were multi-family housing—and during that time enrollments declined. 34 Connecticut State Department of Education, EdSight (www.edsight.ct.gov), Milford School District, District Enrollments.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com in 2008 the Milford education budget was $103,170,41435 or $13,941 per pupil. In 2020, the Milford education budget was $123,406,98736 or $22,717 per pupil. Therefore, while Milford added 1,926 housing units and lost 1,834 school district enrollments, the education budget increased by $20,236,573 and per pupil spending increased $8,776.37 It is also important, now, to return to the earlier statement that the total number of housing units in a community (including the proposed new housing units as part of this application) do play a role in public school enrollments by adding capacity to the community to house school age children. It is reasonable, based on this statement, to assume persons or the Planning and Zoning Board will raise questions or be concerned that by adding more housing, Milford is increasing its capacity for school age children, and opening the door to future increase—possibly dramatic increases in school district enrollments. To put this concern and the data above in context, at Milford’s current rate of 0.24 enrollments per housing unit, Milford would need to add over 7,500 new housing units to regain the 1,834 enrollments lost since 2008 or the enrollment rate per housing unit would need to increase from 0.24 to 0.34 enrollments per housing unit to return to 7,400 enrollments—or a combination of increased housing units and enrollment rates. The fact is this is highly unlikely in the foreseeable future. The demographic trends are working against a return to past enrollment levels—fertility rates have been in decline for decades and household size will likely continue to decline. While it is likely school district enrollments declines will slow and possibly level out, there is no indication the declines will reverse and increase. For the near term, the next ten years, the demographic structure of the Millennial Generation is working against younger families producing large numbers of school age children (and enrollments), as once was expected. In fact, more than half the Millennials are already over the age 29, the peak age for births. In addition, Millennial births peaked at 11% of women at age 29 compared to Generation X with 12% of women at age of 29. Furthermore, and at same time, Millennial births at age 22 were 9.2% of women compared to 11.3% of Generation X women.38 This shows that Millennials are not, and more than likely will not, produce a large cohort of children that will substantially increase school enrollments. Add to this the fact that the youngest Baby-Boomers are now 56 years old, the population structure should continue aging for the next decade.

35 Connecticut State Department of Education, EdSight (www.edsight.ct.gov), Milford School District, Fiscal Resources. 36 City of Milford, Board of Aldermen Adopted Budget, 2019-2020. 37 Education expenditures, the cost of education, is tied more to inflation and the rising costs of salaries, benefits, and transportation, than it is to enrollments. In addition, declining enrollments increase per pupil expenditures as a result of fixed costs being spread over fewer enrollments. 38 Millennial and Generation X comparisons based on United States Census analysis by the PEW Research Center, 2018.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

IV. New Housing Enrollment Projections Understanding, at the macro-scale of Milford, how demographics and demographics structure are impacting school district enrollments (discussed above) allows us to shift to the micro-scale of the proposed 300-unit multi-family residential development. To accomplish this, we utilize a comprehensive study performed by Rutgers University, Center for Urban Policy Research to estimate the projected school district enrollments from the proposed 300 housing units based on the estimated mix of one, two, and three-bedroom units.

Residential Demographic Multipliers The Rutgers “Residential Demographic Multipliers - Connecticut”39 are utilized to project enrollments from the proposed new housing units. The Multipliers are derived from the 2000 U.S. Census and the demographic fields, differentiated by housing type, housing size, housing price, and housing tenure, have been found by Rutgers to be associated with statistically significant differences in Household Size, School-Age Children, and Public School-Age Children. The multipliers are calculated for new housing, defined as units enumerated in the 2000 Census and built from 1990-2000. It is important to note, while the “Residential Demographic Multipliers” are derived from the 2000 U.S. Census and based on new housing built from 1990-2000, the data is still relevant and meaningful today since our demographic trends related to age, fertility rates, and household structure of continued to slowly trend in the same direction they we in the 1990s. Therefore, if there is a time-related error in the Multipliers, they are over, not under, estimating enrollments. An analysis of the Residential Demographic Multipliers for Connecticut reveals that new housing units, regardless of type and tenure, generate fewer total persons, school-age children, and public school-age children (enrollments) per housing unit than is commonly assumed. This is consistent with the calculations and discussion above that showed statewide, Connecticut’s housing/households produce 0.39 enrollments per household (occupied housing unit) and Milford’s housing/households produce 0.26 enrollments household. The proposed housing development consists of 300 multi-family rental units. The mix of unit types by bedroom, as proposed, is anticipated to include 30 three-bedroom units (10%), 135 two-bedroom units (45%), and 135 one-bedroom units. Based on the mix of units by number of bedrooms and the Rutgers Multipliers for each type of unit, the 300-units are projected to generate 72 total enrollments into the

39 Rutgers University, Center for Urban Policy Research, Residential Demographic Multipliers—Connecticut — Estimates of the Occupants of New Housing: Residents, School-Age Children, Public School-Age Children by State, Housing Type, Housing Size, and Housing Price. 2006.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Milford School District. This equals 0.26 enrollments per unit, which is consistent with Milford’s occupied housing stock (household) enrollment rate 0.26 enrollments per unit.40 Table 5. 300 Housing Units – School Enrollment Projections Housing Units Units Multiplier (1) PSAC (2) N-T-D (3) NTD-E Enrollment (6) One-Bedroom (45%) 135 0.04 5.4 50% 2.70 3 Two-Bedroom (45%) 135 0.25 33.75 50% 16.87 17 Three-Bedroom (10%) 30 1.07 32.1 50% 16.05 16 Totals 300 [0.26] (5) 71.25 50% (4) 35.62 36 Notes: 1) Multipliers: Derived from the Rutgers University, Center for Urban Policy Research “Residential Demographic Multipliers – Connecticut.” 2) PSAC stands for Public School Age Children. It is another way of saying enrollments. 3) N-T-D stands for New-To-District: represents the percent of student enrollments who are projected to be new to the Milford School District—most enrollments from new residential development are associated with students already enrolled in the District. For example, recent studies by the South Windsor Board of Education have shown New-to-District enrollments for new developments equal 21% in 2018 and 30% in 2019. Such findings are consistent with our own research. However, to be conservative, we estimate enrollments at 50% new-to-district. Recognizing the New-To-District enrollments are important to understanding the actual fiscal impact of new residential development. 4) The 50% New-To-District estimate in conservatively high. 5) Milford has 21,634 occupied housing units and 5,566 students enrolled in the school district. That equals 0.257 or 0.26 pupils per household. 59.6% of Avon’s housing stock has 3 or more bedroom. The projected enrollments for the proposed multi-family housing units—with only 10% three-bedroom units—are projected to generate 0.26 enrollments per unit. The same enrollment rate as Milford’s existing occupied housing stock. 6) The total New-To-District enrollments projected from the development. The New-To-District enrollments are estimated at 50% of total enrollments or 36 new-to-district enrollments. The New-To-District enrollments are calculated and presented to highlight the point that every enrollment associated with new housing developments/units do not equal a new enrollment into the school district. Households with school-age children typically move less than those without children. In addition, parents often seek not to disrupt their child’s education by moving districts. Therefore, many enrollments from new housing units are existing enrollments that result from rental shifts within the community. The new-to-district calculation often raises concerns about the potential or likelihood of backfill enrollments in the existing units vacated by the occupants/enrollments associated with the new housing units. While there is the potential for and it is likely that some backfill enrollments will occur into the existing units, it is unlikely that such backfill would occur at the same or even similar rate as

40 The fact the proposed enrollment of 0.26 enrollments per unit is the same as the overall rate of 0.26 enrollments per unit for Milford’s existing housing stock is reasonable, considering only 10% of the proposed units are 3-bedroom, compared to Milford’s existing housing stock with 59.6% of units being 3- or more-bedrooms and aging population.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com the shift in enrollments into the new housing units. The most notable reason for this not occurring is, as discussed earlier, the change in demographic structure and decade-long decline in school district enrollments—especially the comparison of new housing development/units to enrollments in Table 4. In addition, assuming 50% new-to-district enrollments is intentionally high, projecting greater impact than anticipated. The households who occupy housings units are continually in flux with approximately 3% to 5% of households moving yearly. For example, in 2017 there were 546 home sales in Milford, 2.6% of the total housing stock or 3.3% of the owner-occupied housing stock.41 Backfill enrollments are more likely the result of home sales, than a shift in renters. At 0.26 enrollments per household, 546 home sales would have the potential to generate 141 enrollments, far more than the 72 total enrollments from the proposed 300 multi-family units.

V. Municipal Fiscal Impact Analysis Understanding that the proposed 300 multi-family housing units will generate 72 total school district enrollments, of which 36 or 50% will likely be new-to-the-district, provides the starting point for thinking through and calculating the municipal fiscal impacts that will result from the 300 housing units. To accomplish this, this section calculates (and presents) the municipal revenues and expenditures relevant to the Connecticut Post Mall site and the proposed 300 housing units. For revenues, the analysis will consider existing property taxes for the Connecticut Post Mall site, estimated projections for new real property taxes and new personal property taxes (motor vehicles), and sewer connection fees associated with the proposed 300 housing units. For expenditures, the analysis will consider the education costs associated with the 72 total enrollments from the 300 housing units and the cost of general government services associated with the 300 housing units.

Revenues The first step in assessing the municipal fiscal impact is to establish the baseline of current conditions— the existing taxes paid by the subject property. Table 6. below provides the existing conditions and tax revenues paid by the existing Connecticut Post Mall site. The data presented is sourced from the City of Milford assessment records. The Post Mall property consists of 74.86 acres, with 8 buildings, and a total of 1,752,680 square feet of gross building space. The appraised value (market value) is $199,529,450. The assessed value (70% of appraised value) is $139,670,615. Multiplied by the Mill Rate (27.71 or 0.02771), current year tax value (taxes paid) is $3,870,272.

41 CERC Town Profiles, Milford 2019.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Table 6. Existing Property – Tax Value Boston Post Building(s) Appraised Assessed Tax Taxes Taxes Road Acres Units Sq. Sf. Value Value Value /Acre /Unit 1201 74.86 8 1,752,680 $199,529,450 $139,670,615 $3,870,272 $51,700 n/a Notes: - Mill Rate = 27.71 (or 0.02771) - Appraised Value is market value and Assessed Value is 70% of appraised value per CT property tax law. - Tax Value is the assessed value multiplied by the mill rate. - The ‘Unit’ column represents building, not residential units. Malls are “an economic engine, hiring hundreds, if not thousands, of workers and providing a significant amount of dollars to the local tax base.”42 In fact, malls are often the top taxpayers in the communities where they reside,43 as is the case with the Connecticut Post Mall. Ranked as the number one taxpayer in 2019 (and in 2010), the City of Milford Comprehensive Annual Financial Report44 show that the taxable assessed value of the Post Mall property has declined from $176,390,000 in 2010 to $149,099,000 in 2019.45 The percentage of net taxable assessed value decreased from 3.28% in 2010 to 2.27% in 2019. This decline in assessed value and percent of the total grand list demonstrates the weakening position of the Post Mall as a result of the disruption and struggles in the retail sector (as discussed above). Considering recent trends and retail sector forecasts, it is highly probable that the Connecticut Post Mall property, if it remains in its present use and form, will continue to depreciate, as well as the taxes paid by the property. Therefore, the proposed 300-unit housing development is critical to diversifying the property, creating and maintaining value, and ensuring the property remains economically viable. To estimate the initial property value for the 300 multi-family housing units, we utilize the construction cost approach to value, adjusted down for soft costs.46 Our assumptions, calculations, and estimates for the appraised, assessed, and tax value of the 300 multi-family housing units are provided in Table 7. We estimate an appraised value $56,801,160, an assessed value of $39,760,812, and a tax value of $1,101,772 (the taxes to be paid per year).

42 The demise of America’s malls can deal a blow to the towns that depend on them, CNBC, June 20, 2020 by Lauren Thomas. 43 The demise of America’s malls can deal a blow to the towns that depend on them, CNBC, June 20, 2020 by Lauren Thomas. 44 City of Milford, Comprehensive Annual Financial Report: Fiscal Year Ending June 30, 2019, Prepared by, City of Milford Finance Department. 45 The depreciation amounts to a total of $27,291,000. However, adjusted for inflation, the 2010 value of $176,390,000 is equal to $206,806,225 in 2019 dollars. Therefore, adjusted for inflation, the Connecticut Post Mall property lost $57,707,225 in value. 46 In utilizing the construction cost approach to value, we recognize that once the property is developed, occupied, and stabilized, it is likely that the City of Milford’s Assessor will utilize the income approach to value. At this preliminary point in the approval process, we do not have detail of development costs needed to estimate the income approach.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Table 7. Proposed New Units – Tax Value Boston Post Building(s) Appraised Assessed Tax Taxes Taxes Road Acres Units Sq. Sf. Value Value Value /Acre /Unit 1201 74.86 300 315,562 56,801,160 $39,760,812 $1,101,772 $14,717 $3,672 Notes: - Building square feet assumes the 1-bedroom units are 750 Sq. Ft., 2-bedroom units are 1,075 Sq. Ft., and 3- bedroom units are 1,350 Sq. Ft. An additional 10% of building area is added to account for common areas. - Appraised Value (market value) utilizes the construction cost approach to value. Total construction is estimated at $225 per square foot and is then reduced to 80% of the total ($180/Sq. Ft.) to account for soft costs that do not contribute to real property value. - Mill Rate = 27.71 (or 0.02771). The new value added to the Connecticut Post Mall property from the new housing units is substantial and equal to the inflation adjusted property value depreciation since 2010. The estimated $1,101,772 in new taxes to be paid to the City of Milford is also substantial, equal to 28% of the $3,870,272 in taxes paid by the present property. This new property value and taxes paid will go a long way toward stabilizing the Connecticut Post Mall property and City of Milford Grand List in the near term. In addition to the real property taxes to be paid by the 300 multi-family housing units, the City of Milford will also receive personal property tax revenue from the motor vehicles owned by the occupants of the housing units. For taxable property purposes, we estimate a total 450 motor vehicles to be associated with the 300 residential units (or 1.5 vehicles per unit). Table 8 provides the assumptions, calculations, and estimates for the appraised, assessed, and tax value of the 450 motor vehicles. This result is a conservative estimate of $113,472 per year in personal property taxes to be paid to the City of Milford. Table 8. Proposed Development – Personal Property Tax (Motor Vehicles) Motor Total Housing Vehicles Motor Assessed Mill Total Taxes Units Per Unit Vehicles Value Rate Estimated Taxes Per Vehicle 300 1.5 450 $4,095,000 27.71 $113,472 $252 Notes: - The Milford Zoning Regulations (Sec. 5.1.4 Off-Street Parking Requirements) currently require 2 parking spaces per 1-bedroom unit and 3 parking spaces per 2- and 3-bedroom units. Based on the proposed unit mix of the 300 units, zoning will require 765 parking spaces. We believe the required parking is much higher than the actual vehicles to be associated with the 300-units. - To calculate the total number of motor vehicles (for tax purposes) associated with the 300 residential units, we utilize a ratio of 1.5 motor vehicles per unit (300 units x 1.5 = 450 motor vehicles). - Specific data related to the average appraised value of motor vehicles in Milford was not found in the City of Milford financial statements. Therefore, based on our experience, research, and similar assignments in dozens of CT communities, we estimate the appraised value of motor vehicles at $13,000 and the assessed value at $9,100 per motor vehicle.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

The proposed 300 multi-family housing units are projected to generate approximately $1,101,772 in new real property tax revenues. In addition, the 450 motor vehicles are projected to generate approximately $113,472 in new personal property tax revenue. Combined, the new real and personal property taxes will contribute an estimated $1,215,244 in revenues to the City of Milford. This will increase the tax revenue generated from the Connecticut Post Mall property from $3,870,272 to $5,085,516, a substantial and positive increase in revenue (see Table 9 below). Table 9. Existing and Proposed Properties – Tax Value Boston Post Building(s) Appraised Assessed Tax Taxes Taxes Road Acres Units Sq. Sf. Value Value Value /Acre /Unit 1201 74.86 8 1,752,680 $199,529,450 $139,670,615 $3,870,272 $51,700 n/a 1201 74.86 300 315,562 56,801,160 $39,760,812 $1,101,772 $14,717 $3,672 Total 74.86 300 2,068,242 $256,330,610 $179,431,427 $4,972,044 $66,417 n/a Personal Property 450 Motor Vehicles $5,850,000 $4,095,000 $113,472 n/a $252 Combined Total $5,085,516 Notes: - Mill Rate = 27.71 (or 0.02771). - The 300 multi-family units and 450 motor vehicles will add an estimated $1,215,244 in tax value to the Connecticut Post Mall property and payments to the City of Milford.

Expenditures - Education The Milford Board of Education Operating budget totaled $95,078,487 for the 2019 – 2020 budget year.47 In addition, the City of Milford contributes an additional $28,328,500 toward education expenditures for a total education budget expenditure of $123,406,987.48 To estimate the cost of enrollments resulting from the proposed 300 multi-family units, we make four calculations aimed at estimating the actual cost of new per-pupil enrollments, rather than the common and misleading calculation of total per-pupil spending.49 Table 10 provides a summary of these calculations and detailed notes to explain the specifics of the calculations.

47 Milford Board of Education Adopted Budget, 2019-2020. 48 City of Milford, Board of Aldermen Adopted Budget, 2019-2020. 49 The reason the total expenditures per-pupil spending is misleading, is that it assumes each new enrollment will include an increase in all cost. This is not the case, many educations costs are fixed and do not change based on enrollments.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Table 10. Projected Enrollments & Education Expenditures BOE Expenditures Per Pupil Total PSE Total Cost N-T-D N-T-D Cost Total Expenditures $22,717 72 $1,635,624 36 $817,812 Local-Share Expenditures $18,092 72 $1,302,624 36 $651,312 Allocated Expenditures $10,855 72 $781,560 36 $390,780 Calculation Notes: - Total Expenditures is the BOE budget dived by the total enrollment. BOE Operating budget 2019-20 = $95,078,487 plus the City of Milford share of $28,328,500 for a total of $123,406,987 / October 1, 2019 enrollment of 5,566 = $22,717 per pupil. - Local-Share Expenditure is the per pupil expenditures less non-local tax revenues (federal, state, and other revenue sources). Milford’s total 2019-20 budget is $216,550,313. However, local property tax account for only $176,798,053 of the total revenues or 81.6% of total revenues. Therefore, to calculate the fiscal cost of education related to property taxes, the Local-Share Expenditures for education cost per pupil are reduced to 81.6% of the Total Expenditures ($22,717) or $18,092 per pupil. - Allocated Expenditures is based on a general analysis of the BOE budget that isolated approximately 40% of the budget that is unlikely to be impacted by changes in enrollment (For example, district office expenditures, school administrative offices, utilities, building operations and maintenance, prorated staffing, etc.). Therefore, the Local-Share Expenditure is reduced by 40% to provide for the Allocated Expenditure. This approach is conservative compared to other approach that would allocate new resources and staffing per new pupil. - N-T-D (New-To-District) represents the portion or percent of student enrollments who are anticipated to be new to the Milford School District. Our research and other studies show that student enrollments generated by new housing development are not all new enrollments into the school district. In fact, most enrollments from new housing development are existing enrolled students who have relocated within the district. A recent study by the South Windsor (DRG-B District) Board of Education revealed that New-to-District enrollments for new multi-family residential developments ranged from 21% in 2018 to 30% in 2019. New-To-District enrollments are important to understand and need to be factored into any calculations of fiscal impacts. - To account for the New-To-District enrollments, we conservatively estimate that 50% or enrollments will be new-to-district.

Expenditures – General Government To estimate general government expenditures associated with the proposed 300 multi-family housing units, we isolate those portions of the budget that can be attributed to residential uses by a process of elimination. For example, we have already accounted for (isolated) education expenditures, or $123,406,987 of the $216,550,313 by allocating the education expenditures to fiscal impact of school district enrollments discussed above. That accounts for 56.9% of the total City of Milford budget.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

To further isolate portions of the budget, we note that in 2019 commercial and industrial properties accounted for approximately 20% of the total Grand List.50 It is commonly understood that commercial and industrial land uses are fiscal positives regarding municipal tax revenue and expenditures. For example, a 2012 study published by the American Farmland Trust and Connecticut Conference of Municipalities51 showed that commercial and industrial land uses require, on average, only $0.27 in community services for every $1.00 generated in tax revenue. Therefore, commercial and industrial properties pay-their-own-way. In addition, commercial and industrial properties further subsidize the residential tax burden. As a result of this, we can account for and deduct 20% of the Milford budget that is funded by commercial and industrial property tax revenues. Combined with education expenditures (56.9%), commercial and industrial properties (20%), a total of 76.9% of the municipal budget expenditures can be accounted for, leaving 23.1% of Milford’s budget to be allocated exclusively to the residential share of general government services/expenditures. Therefore, we allocate $280,710 of the $1,215,194 in real and personal property tax revenues generated by the proposed 300 multi-family housing units to the cost of general government services (expenditures).

Municipal Fiscal Impact The fiscal impact findings and conclusions, based on the analysis and assessment presented above, are straight forward. The existing Connecticut Post Mall property is a fiscal positive for the City of Milford. The Connecticut Post Mall is Milford’s largest taxpayer. In addition, Post Mall contributed approximately $3,870,272 in tax revenues to the City of Milford last year. Unfortunately, the Connecticut Post Mall’s property has been depreciating as a result of the contracting retail sector, which has negatively and disproportionately impacted large enclosed malls. The property owners are seeking to innovate, to transform, (re)position, and diversify the property and income producing asset classes on the property. The proposed 300 multi-family housing units are a substantial investment in this property that will add value to the existing property, while creating economic vitality and sustainability. The proposed housing units will generate an additional $1,215,244 in real and personal property tax revenue, bring the total tax revenue to $5,085,516. Below, Table 11 (Municipal Fiscal Impact – Revenues & Expenditures), provides the calculation for the fiscal impact of the proposed 300 multi-family housing units. The calculations for revenues include real property taxes ($1,101,772), personal property taxes ($113,472), and sewer connection fees ($98,640). The expenditures include both education and general government services. General government expenditures are estimated at 23.1% ($280,718) of real and personal property tax revenue. The

50 City of Milford, Comprehensive Annual Financial Report: Fiscal Year Ending June 30, 2019, Prepared by, City of Milford Finance Department. 51 American Farmland Trust and the Connecticut Conference of Municipalities, (2012): Planning for Agriculture: A Guide for Connecticut Municipalities. Connecticut.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com education expenditures are presented in the table as Allocated and New-To-District. The aim of this presentation of revenues and expenditures is to not use the misleading Total Expenditures (or Local Share) which falsely assume all costs to new enrollments. Therefore, the Allocated and New-To-District education expenditures are utilized to better represent the actual costs of new student enrollments created by new residential development. Based on this approach, we find and estimate a positive fiscal impact of $642,974 and no less than $251,614. Table 11. Municipal Fiscal Impact – Revenues & Expenditures Revenues & Expenditures Total Revenues Real Property Taxes (300 Units) $1,101,772 Personal Property Taxes (Motor Vehicles) $113,472 Sewer User Fee ($328.80/unit/year) $98,640 Total Revenue $1,313,884 $1,313,884

Expenditures Allocated N-T-D/Allocated Education Expenditures $781,560 $390,200 General Government (23.1% real property taxes) $280,710 $280,710 Total Expenditures $1,062,270 $670,910 Municipal Fiscal Impact $251,614 $642,974

V. Economic Impact Job Creation & Wages The aim of our economic impact assessment is to provide the Planning and Zoning Board with reasonable estimates for job creation and overall economic impact from the proposed 300 multi-family housing units. It has long been known, going back to ‘The New Deal Era,’ that housing is a key driver in our economy. Housing construction creates jobs and households generate consumer spending. Research has shown that new housing positively impacts the local economy. For example, a study by the National Association of Home Builders (2015) found that the construction of 100 multi-family units creates 165 jobs, $14.5 million in wages, and $2.4 million in taxes & fees in the first year. In the second year (and beyond), the study found on average each 100 housing units creates another 52 jobs. Using these findings as multipliers, we can estimate the economic impact of 300 multi-family units. It would be easy to simply triple the finding of the NAHB report and provide high or strong economic impacts. However, we believe that economic impacts typically overestimate and project higher than actual economic outcomes. In addition, based on our experience and understanding of Connecticut’s real estate market, development costs, and overall condition of the Connecticut economy, we adjust the NAHB numbers to better reflect Connecticut. Job growth (creation) has been sluggish in Connecticut for decades. Therefore, we are not comfortable with the NAHB 165 jobs created and will reduce to 124 jobs created (or 75% of NAHB) in our calculations. We do not calculate taxes and fees

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com since those were already addressed above in the municipal fiscal impact analysis. As for wages, even though Connecticut’s median household income is 15% higher than the national median household income, we reduce the wages by 20% to $11.6 million based on our understanding of construction and labor costs and recognition that the household income of renters is typically lower than that of owner- occupied households. Based on these adjustments, we estimate the construction of 300 multi-family units will create 372 jobs52 and $34.8 million in wages in the first year. In the second year (and beyond), we estimate the 300 housing units will create (or sustain) 117 jobs53.

Consumer Spending Consumer spending is another way to think about the economic impacts of new housing and households. To estimate the consumer spending impact of new housing, we use discretionary income. Based on figures from several sources,54 we estimate that between 25% and 35% of household income is available for discretionary spending. Based on the average rental value of the 300 housing units, we estimate the average household income to be approximately $55,000. Assuming 30% of household income is discretionary, we further estimate that approximately $16,500 per household income is available for discretionary spending. That totals $4,950,000 in discretionary spending for the 300 households. Last, we assume and estimate that only 25% of household discretionary spending will be spent in the local community (within Milford), recognizing that our lives stretch across metropolitan space. That 25% in local discretionary spending totals $1,237,500 in consumer spending at local businesses per year.

Economic Impact We find and estimate that the proposed 300 multi-family housing units will have a positive economic impact on the local (Milford) economy. This impact includes 372 jobs created (or sustained) in year one and an additional 117 jobs created (or sustained) in year two and following years. In addition, the

52 The calculations for job creation in the NAHB study utilizes an all-inclusive approach or what can be called a ‘commodity chain’ approach to economic impact and job creation. That means the calculations include the positive economic impacts and jobs created and sustained for suppliers of materials, transportation of materials to the site, on-site construction, and the ripple effects offsite during construction. This approach also includes the positive impact on jobs related to soft costs associated with the development. For example, architects, engineers, and other professionals involved in the design, entitlements, and general management of the development from inception to completion. 53 The calculation for the second-year job creation in the NAHB study is also all-inclusive. That means the calculations include the on-site job creation and the ripple effects offsite. For example, this includes jobs associated with property management, contracted property maintenance, and the jobs created and sustained in the community by consumer spending of the residents. 54 Sources include, The Site to Do Business, ESRI Tapestry, US Census data, government reports, and other studies.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com economic impact includes approximately $34.8 million in wages and an estimated $1,237,500 in local (within Milford) consumer spending. Appendix I. Methods and Sources

This report is intended to provide a municipal fiscal impact analysis for the proposed 300 multi-family housing units on the Connecticut Post Mall site. Specifically, the report is aimed at estimating and projecting potential municipal fiscal/tax impact (positive or negative) on the City of Milford and other economic impacts. To accomplish this, the following approach and method was utilized: Market Assessment: While not presented in this report, a general review of existing market conditions was conducted. This market assessment included a review of existing rental property listings/rates and municipal tax assessment data for other rental properties. In addition, the market assessment, we also reviewed demographic and socio-economic data. Sources included, US Census, American Fact Finder, CERC Town profiles, ESRI Tapestry, STDB (The Site to Do Business), and ULI real estate publications. The primary focus of this market assessment was to understand the general characteristics of the local and regional housing and retail market. Sources: AdvanceCT, Town Profile – Milford 2019, https://www.advancect.org/advancing- business/data-information/town-profiles/. U.S. Census (2018), https://factfinder.census.gov The Site to do Business for Commercial Real Estate Professionals, https://www.stdb.com/ Existing Site: The Connecticut Post Mall is located at the intersection of Route 1 (Boston Post Road) and Interstate I-95 (Exit 39). The site consists of 74.86 acres with 8 buildings totaling 1,752,680 square feet of retail space. The subject property was visited on February 16, 2020. This site visit included a general inspection of the site and surrounding area and proximity and access to the interstate highway. Google Earth Pro was further utilized to inspect and become familiar with the site, the general area, and other properties. The City of Milford online assessment database, Plan of Conservation and Development, and Zoning Regulations were also reviewed. Proposed Multi-Family Housing: This review included the conceptual site plan and unit/bedroom mix. In addition, we reviewed market data to estimate construction costs and anticipated market values. In addition, we relied on our professional experience, knowledge, and understanding of real estate market. Construction cost estimates, market value, and tax assessments are converted to per square foot and/or per unit values to allow us to equalized comparison. To test our assumptions and approach we compare our work with best practices

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com and ULI publications. In addition, we rely on the work and publications of Professor Robert Burchell, of Rutgers University, as background sources and methods for our fiscal impact analysis. Sources: Brett, Deborah L., and Schmitz, Adrienne, (2009): Real Estate Market Analysis: Methods and Case Studies. Second Edition. Urban Land Institute. Washington, D.C. Burchell and Listokin, The Fiscal Impact Handbook, New Brunswick, New Jersey, Center For Urban Policy Research, 1978. Burchell, Listokin, and Dolphin, The New Practitioners Guide to Fiscal Impact Analysis, New Brunswick, New Jersey, Center For Urban Policy Research, 1985. Burchell, Listokin, and Dolphin, Development Impact Assessment Handbook, Washington, DC, Urban Land Institute, 1994. Miles, Mike E., Berens, Gayle L., Eppli, Mark J., and Weiss, Marc A., (2007): Real Estate Development: Principles and Process. Fourth Edition. Urban Land Institute. Washington, D.C. Fiscal Impact of Public-School Age Children (Enrollments): To conduct the analysis of fiscal impacts related to public school age children, the Rutgers University, Center for Urban Policy Research “Residential Demographic Multipliers for Connecticut” are utilized. These multipliers are a trusted source of data/multipliers for public school age children generated by new housing development. To ensure the generalized multipliers work for the local municipality, a few calculations are made to cross-check the data. For example, dividing the actual school district enrollment by the number of housing units to establish a baseline for enrollments per unit. In addition, we make further calculations using U.S. Census data on housing occupancy, single-person households, family-households, family-households with children, and age cohort data to calculate the approximate number of enrollments per unit for both owner- and renter- occupied housing. In addition, we continually our calculations to previous studies we have conducted to ensure there is no excessive variation. We also conduct post-development reviews on out calculations—once a project is occupied and stabilized, we test our projected enrollments with the actual enrollments. Other sources used in this process include the State Department of Education District Profiles, the EdSite data sets, local enrollment studies, BOE, and municipal budgets. Sources: Connecticut, State of, Department of Education, EdSight, http://edsight.ct.gov, Milford 2008-2019. Connecticut, State of, Department of Economic and Community Development, Annual Construction Report (Housing Permit Data) 1997-2019, www.ct.gov/ecd/cwp/view.asp?a=1106&q=250640. Milford, Board of Education, Adopted Budget 2019-2020.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Milford, City of, Assessment Records, 2020. Milford, City of, Board of Alderman Adopted Budget 2019-2020. Rutgers University, Center for Urban Policy Research, Residential Demographic Multipliers for Connecticut, 2006. Job Creation: For calculating job creation and consumer spending, we utilize multipliers, based on a well-recognized study by the National Association of Home Builders. The study found that the construction of 100 multi-family units create 165 jobs, $14.5 million in wages, and $2.4 million in taxes & fees in the first year. In the second year (and beyond), the study found on average each 100 housing units create another 52 jobs. Source: National Association of Home Builders, (2015): The Economic Impact of Home Building in a Typical Local Area: Income, Jobs, and Taxes Generated. This approach and method recognize fiscal impacts, especially municipal fiscal impacts, as more of an art than a science. Many factors and variable influence development, demographics, socioeconomics, public policy, and local fiscal impacts of new development. Therefore, this approach is intended to provide reasonable estimates of the fiscal impacts resulting from the specific development. To say it another way, these are reasonable projections and estimates, not forecasts or predictions of actual numbers or dollars.

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DONALD J. POLAND, PHD, AICP SENIOR VP AND MANAGING DIRECTOR, URBAN PLANNING PHONE: 860.655.6897 – E-MAIL: [email protected] – www.gomanyork.com

Statement of Qualifications – Expert Witness My name is Donald J. Poland, PhD and I am an urban geographer and professional planner with twenty-five years’ experience in land use planning, community and economic development, and market and development feasibility. I have worked in public, private, non-profit, and academic sectors as a municipal planning director, zoning enforcement official, planning consultant, executive director/CEO, and as a university lecturer and professor in human geography, urban planning, and tourism. I earned my PhD in the Department of Geography, Cities and Urbanization program at UCL, London, England. My doctoral dissertation explored the remaking of urban space through the utilization of urban-ecological theory and metaphors to better understand how places change. I also earned a Master of Science in Geography, concentrating in planning, from Central Connecticut State University (CCSU) and a Bachelor of Arts degree, majoring in both Psychology and Geography, from CCSU. As a planning professional, I’m a member of the American Institute of Certified Planners (AICP) and a Certified Zoning Enforcement Official (CZEO). I have been accepted as an expert witness in the areas of land use planning, neighborhood redevelopment, and community development in the United States District Court, Eastern District of Louisiana. I have also been accepted as an expert witness in the Circuit Court of St. Louis County, State of Missouri. Over the course of my career, I have held the positions of Zoning Enforcement Official for the Town of East Hartford (1996-1998), Director of Planning and Development for the Town of East Windsor (2000-2004), and Executive Director/CEO for the Neighborhoods of Hartford, Inc. Since 2008, I operate a boutique planning consulting practice and have worked on assignments in 15 states and over 100 local jurisdictions. This work includes post-Katrina planning, zoning, and redevelopment strategies in St. Bernard Parish, Louisiana; an HUD NSP-2 application and reinvestment strategy for Venango County, Pennsylvania; zoning regulation modernization and updates as part of the 2016 Comprehensive Plan for Canton, Ohio, Canton, Ohio; a downtown economic investment strategy for Oswego, New York, and countless municipal planning and zoning assignments in Connecticut. In addition, I have also represented dozens of real estate developers before public agencies for commercial, residential, industrial, and mixed-use development projects— including market research, financial feasibility, project viability, and municipal fiscal impact analysis. I’m a Past-President of the Connecticut Chapter of the American Planning Association (CCAPA) and Past Chairman of the CCAPA Government Relations Committee. I have also served on APA’s Chapter Presidents Council, the Executive Committee for the CT Association of Zoning Enforcement Officials, the Board of Trustees for the CT Trust for Historic Preservation, the Board of Trustees for the Bushnell Park Foundation, and was a public member of the State Board of Examiners for Professional Engineers and Land Surveyors. In addition, I have assisted the CT General Assembly’s Planning and Development Committee with bill screening and drafting legislation. I also participated in the creation of the American Planning Association’s development of a smart growth policy guide and was a member of the National Delegates Assembly (for the Smart Growth Policy Guide). As an academic, I have taught over a dozen courses in human geography, urban planning, and tourism at Saint Joseph University, Manchester Community College, Central Connecticut State University, the University of Connecticut, and Trinity College. I held the position of Visiting Lecturer in Public Policy, Graduate Studies Program at Trinity College, Hartford, CT and Associate Professor, Tourism and Hospitality, at CCSU. I was awarded the CT Homebuilders 2003 Outstanding Land Use Official Award and am a 2004 alumnus of the Hartford Business Journal’s Forty Under Forty leaders.

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Relevant News Articles

17

The Dying Mall’s New Lease on Life: Apartments

Patrick Sisson June 30, 2020

Key Takeaways

 More than half of all U.S. department stores in malls will be gone by 2021.  A third of malls will be vacant due to the economic struggles brought on by the pandemic.  There is a need for more affordable housing options.  Commercial real estate offers convenient features for residential spaces such as central locations and transit connections.

It’s definitely, finally, without a doubt, the end of malls, right?

The multiple crises impacting the U.S. economy — the botched response to the coronavirus and the resulting economic fallout, and lack of spending power — have delivered a new gut punch to brick‐and‐ mortar retail, a sector that was already reeling. More than half of all U.S. department stores in malls will be gone by 2021, one real estate research firm predicts, and surviving retailers may not be far behind; once‐mighty brands such as Cheesecake Factory and the Gap are skipping rent payments, Starbucks is closing physical locations, and developers see a future for big box stores as office complexes. Banks fear “a stampede” of landlords looking to restructure loans after commercial tenants miss their rents. Last week, the Trump administration floated the idea of turning the glut of empty retail space into affordable housing.

At the Alderwood Mall in Lynnwood, a suburb north of Seattle, an adaptive reuse project already in progress suggests that America’s vast stock of fading shopping infrastructure could indeed get a second life as places to live. Such transformation could even bring malls closer to the “village square” concept they were initially envisioned to become.

Developers are turning a wide swath of the 41‐year‐old shopping center into Avalon Alderwood Place, a 300‐unit apartment complex with underground parking. The project won’t completely erase the shopping side of the development: Commercial tenants will still take up 90,000 square feet of retail. But when the new Alderwood reopens, which developers expect will happen by 2022, the focus will have shifted dramatically. One of the mall’s anchor department stores, Sears, shut down last year; in a sense, the apartment complex will be the new anchor.

"This project is a great example of evolution in the shopping center industry,” says a spokesperson for Brookfield Properties, which owns the property and is collaborating with AvalonBay Communities, Inc. on the residential component. (Brookfield declined to offer a cost estimate for the project.) “Today, people prefer to live in smaller spaces and want walkable developments rather than relying on vehicular transit. This project caters to these needs.”

The Lynnwood project exemplifies how the Covid‐19 pandemic isn’t as much changing real estate as accelerating existing trends. Randy White, CEO of White Hutchinson Leisure & Learning Group, a 1 consulting firm focused on location‐based entertainment, says the Alderwood project is smart, because it’s envisioning a world where we can digitally shop and entertain ourselves at home. “Right before the pandemic, a lot of these malls thought restaurants and entertainment would be their savior, the new anchors,” he says. “Those hopes are dashed. There’s even a question if movie theaters are going to survive.”

Lynnwood may offer an ideal testing ground for the long‐term opportunities in large‐scale suburban mall‐to‐housing conversion. The suburb of roughly 40,000 people is a commuter bedroom community for Seattle, which has been struggling mightily with a severe housing shortage. The mall had plenty of vacant real estate needed for new homes. And a planned expansion of light rail from Seattle to Lynnwood in 2024, part of the region’s Sound Transit Extension Phase 2, will make market‐rate apartments even more attractive for residents who commute to jobs downtown or at the Boeing or Microsoft campuses.

“There have been some great examples of this kind of redevelopment, such as Tyson’s Corner in Virginia, but it’s very specific to individual cases, and very expensive,” says Nick Egelanian, president of retail consultancy SiteWorks, who predicts up to a third of malls will be vacant due to the economic fallout from the pandemic. “If it’s a good location, you can backfill that with residential, hotel, office and entertainment.”

“Before the Great Recession we had too many retail spaces. Now we have way too many retail spaces.”

Lynnwood has always seen the mall as a regional growth center, says David Kleitsch, the city’s economic development director. Ever since the end of the Great Recession, the city has planned for residential growth around the shopping center, including upzoning to encourage more dense housing, pushing for Sound Transit extensions, and investing in streetscapes and connectivity. “We see this as a catalyst for future growth, and housing will be a big part of that,” says Kleitsch.

Brian Lake, a senior attorney at the Pacific Legal Foundation who focuses on housing issues, believes that, minus the hurdles put up by zoning regulations and red tape, such commercial conversions should be happening everywhere. From a construction standpoint, conversions are simple. “We need to open up every opportunity possible to develop new affordable housing,” he says. “Fannie Mae estimated we need an additional 2.5 million units just to satisfy the long‐term demand, and that’s before this year’s crises.”

Mall owners and operators, such as Brookfield and Simon Property Group, have had a brutal 2020: Shifts in consumer behavior have been gnawing away at the classic enclosed suburban mall format for many years; then the pandemic completely upended in‐person shopping. Mark Hunter, managing director of retail asset services at CBRE, says operators suddenly had to shut down, then coordinate with numerous government agencies on how to reopen with stringent new sanitation and safety protocols, not to mention overcome challenges with furloughed staffers and out‐of‐season inventory.

Even as fresh Covid‐19 outbreaks race across the suburbs, in June Brookfield managed to reopen every single one of its nearly 170 locations in 43 states. But “normal” is a distant memory amidst a massive wholesale shift in commercial real estate. Consider the recent fate of two much‐touted new flagship shopping developments of the last year: The American Dream Mall in New Jersey now hosts a Covid‐19 testing facility, and struggling Manhattan mega‐development Hudson Yards lost its big anchor, Neiman‐ Marcus.

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“Before the Great Recession we had too many retail spaces; now we have way too many retail spaces,” says White. “It may be we’ll only be left with the A malls. Before the pandemic, I thought the B‐plus malls would survive. The outdoor lifestyle centers will survive — they’re perceived as safer than indoors. But it’s hard to escape the fact that we’ve trained people to fear the world, and that it’s going to have long‐term impacts on their behaviors.”

Converting commercial real estate to housing may be the best use of land in such an over‐retailed country. Big shopping centers tend to be centrally located and connected to transit. Hunter sees excess retail space at malls becoming more adaptive, and filling uses that aren’t hospitality focused, such as residential, or even flex or warehouse space. During a time of housing shortages, Lake believes that transforming empty commercial buildings is a “moral imperative.”

The Alderwood redevelopment brings challenges that Kleitsch and other local officials are trying to get out ahead of as construction, which restarted in mid‐May, continues. Lynnwood is a middle‐ to low‐ income suburb, with lots of service workers, so the city is working on a housing action plan to make sure social services and education arrive in the community, not just new apartments. The mall may be evolving, but the desire, and challenges, in creating a community‐oriented development still remain.

“You can have acres and acres of housing, but without a community, is it a place?” Kleitch says. “Does it fulfill somebody’s experience? We want to be more than that.”

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The demise of America's malls can deal a blow to the towns that depend on them

Lauren Thomas June 20, 2020

Key Takeaways:

 Retail centers provide $400 billion in local tax revenue annually.  Retailers and mall landlords are unable to pay their bills due to the decrease in mall shoppers.  Experts estimate 25,000 retail stores could close in 2020.  Local towns will lose a large amount of tax revenue in months.

The coronavirus pandemic is speeding up the demise of America's struggling shopping malls, which could deal a devastating blow to some towns that depend on them. When a mall goes dark, a community loses more than just a place to shop and grab a slice of pizza at the food court's Sbarro. In many neighborhoods, the mall is an economic engine, hiring hundreds, if not thousands, of workers and providing a significant amount of dollars to the local tax base. Malls and shopping centers across the country provide $400 billion in local tax revenue annually, according to the International Council of Shopping Centers, the retail real estate industry's trade group. And there are about 1,000 malls — both privately and publicly held — still operating in the U.S. today, according to commercial real estate services firm Green Street Advisors. "I worry a lot as this crisis plays out," ICSC CEO Tom McGee said. "Our industry funds everything from the fire and police to [local] infrastructure." In a pre‐Covid‐19 universe, teenagers would often land their first jobs at the mall. Kids would hang there after school. So‐called mall walkers would use the open space in the mall before stores opened to the public to break a sweat. Mom‐and‐pop shop owners would open their first businesses there. And department stores, a mall's coveted anchors, once thrived during their prime. The acceleration of e‐commerce, along with a shift toward more consumers wanting to live downtown instead of the suburbs, has led to fewer people frequenting malls over the years. And as the pandemic hit, malls were boarded up, along with the stores in them. Some, including the Northgate Mall managed by Northwood Retail in Durham, North Carolina, are now closing for good. Former department store executive Jan Kniffen has predicted a third of America's malls will vanish by 2021. The rent is due As retailers aren't able to pay rent on time, landlords of America's malls are not able to pay their own bills, making matters worse during the pandemic and speeding up this domino effect. The Tennessee‐ based mall owner CBL & Associates warned earlier this month that its ability to continue as a going concern is in doubt after the retailers in its properties have skipped rent payments during the Covid‐19 crisis, forcing CBL to miss two of its own interest payments. Should CBL be forced into bankruptcy, it would mark the first filing by a commercial real estate owner during the pandemic. They keys to CBL's 108 malls could be handed back to lenders. Some of its properties could be shut down permanently, if no new owners emerge to take over and run these assets. 4

I worry a lot as this crisis plays out. Our industry funds everything form the fire and police to [local] infrastructure. Tom McGee CEO, INTERNATIONAL COUNCIL OF SHOPPING CENTERS A CBL spokesperson declined to comment about a potential bankruptcy. CoolSprings Galleria, a CBL mall in Franklin, Tennessee, offers up one such example of a property that is a huge aid to its local tax base. And as the mall has taken a hit during the pandemic, the town of Franklin is tapping into its budget reserves to make ends meet, according to one administrator. "Our mall is such an attraction, it drives our revenue significantly," according to Franklin County City Administrator Eric Stuckey. "If you are so dependent on sales taxes [like us], it can take just a month or two and you'll see the impact." He compared the situation with 2008 and the Great Recession. "The recession had a real impact on disposable income," Stuckey said. "What people weren't able to spend at the mall ... translated into lost local revenue." He explained that Franklin will need to use its fund reserves for the foreseeable future until CoolSprings Galleria bounces back, which he expects to happen over time since it is the only major retail draw in the area. Others will be less fortunate. "Malls die slowly, generally over a period of years," said Lacy Beasley, president of the real estate advisory firm Retail Strategies. "At first one anchor closes and then another. For a mall to shut down completely, the mall has already been declared dead by the customer." However, the rapid acceleration of store closures this year, due in large part to the Covid‐19 crisis, is adding to mall owners' challenges and could be speeding up that death. As many as 25,000 closures could be announced by retailers this year, according to a tracking by Coresight Research, with 55% to 60% of those in malls. That would set a new record, up from a previous record of more roughly 9,800 in 2019, the firm said. As anchor tenants such as bankrupted J.C. Penney go dark, non‐anchor tenants such as American Eagle or Gap typically have what are known as co‐tenancy clauses to be able to vacate the property sooner if they'd like. With enough vacancies and nothing to replace them, a mall could be pushed out of business this way. (Penney is already kicking off going‐out‐of‐business sales at more than 150 locations this month, as it tries to restructure the company in bankruptcy proceedings.) To be sure, developers are trying to get creative. A former Sears store at the West Oaks Mall in Ocoee, Florida, was rebuilt into a Xerox call center. Ford Motor moved its offices into a former Lord & Taylor department store at the Fairlane Town Center in Dearborn, Michigan. But it might not be enough. "Malls can be redeveloped and released, but it often will never replace the impact [to towns] the mall had in their heydays," Retail Strategies' Beasley said. A blow to the budget PREIT, a real estate investment trust that has a portfolio of 21 malls in the U.S. including Cherry Hill Mall in Cherry Hill, New Jersey, said it pays more than $65 million in real estate taxes every year. In Pennsylvania and New Jersey alone, the company estimates that its malls account for about 17,000 jobs. "When you think about a mall from an economic perspective, it's a real engine, there is no question about it," PREIT CEO Joe Coradino said in an interview. "We are typically the largest tax payer in any given municipality." An analysis by Retail Strategies outlines the substantial impact a mall closure would have on local municipal budgets. The average size of a regional mall in the U.S. is anywhere between 400,000 and 800,000 square feet, with three to five anchor tenants. So‐called C‐ and D‐rated malls, which bring in the least amount of sales per square feet, are those considered to be the most at risk to go under. These malls average sales of between $200 and $325 per square foot, Retail Strategies said. 5

That said, the annual sales receipt of an average C‐ or D‐rated mall would be roughly $90 million to $145 million, according to the analysis. And at a 2% local tax collection rate, the locality that it is situated in would collect anywhere between $1.8 million to $3 million annually on the mall for sales tax, it said. There are roughly 730 B‐ C‐ and D‐rated malls in the U.S., according to Green Street. As purchases made at certain malls have tumbled over the years, municipalities are left trying to reshape their budgets. "Cities are more incentivized to help retail now than they ever have been," Beasley said. Even the biggest mall owner in the U.S., Simon Property Group, has voiced concern over this issue. Simon's portfolio of about 200 malls and outlet centers, including Roosevelt Field mall in East Garden City, New York, are by and large A‐rated, making it one of the best operators in its space. Most, if not all, of Simon's malls are expected to stay open longer‐term. "We want to help these local communities because frankly they depend on our sales tax and our real estate tax," Chief Executive David Simon said in May during an earnings conference call, as he discussed the mall owner's plans to reopen during the coronavirus pandemic. "I hope the communities appreciate what we're doing," he added, mentioning the Long Island area in New York as one example, where Simon pays more than $60 million annually in property taxes for a handful of properties.

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With Department Stores Disappearing, Malls Could Be Next

Sapna Maheshwari

July 5, 2020

Key Takeaways:

 Hundreds of retail stores will close within the next 5 years.  Nearly 25% of America’s malls are at risk of closing.  Major retail mall owners are millions of dollars in debt and doubt their ability to stay open.  Malls have begun to restructure they way they receive income.

The directory map for the Northfield Square Mall in Bourbonnais, Ill., has three glaring spaces where large department stores once stood. Soon there will be a fourth vacancy, now that J.C. Penney is liquidating stores after filing for bankruptcy.

With so much empty space and brick‐and‐mortar retail in the midst of seismic changes even before the pandemic hit, the mall’s owners have been talking with local officials about identifying a “higher and better use for the site,” though they have declined to elaborate on what that could be.

“Filling in one anchor space, generally, is doable,” said Elliot Nassim, president of Mason Asset Management, which co‐owns the Northfield Square Mall and dozens of other enclosed shopping centers. “But once you get hit by two others and you’re dealing with three anchor closures, that’s usually where we become a little more likely to put it into the bucket of a redevelopment.” The standard American mall — with its vast parking lots, escalators and air conditioning, and an atmosphere heavy on perfume samples and the scent of Mrs. Fields cookies — was built around department stores. But the pandemic has been devastating for the retail industry and many of those stores are disappearing at a rapid clip. Some chains are unable to pay rent and prominent department store chains including Neiman Marcus, as well as J.C. Penney, have filed for bankruptcy protection. As they close stores, it could cause other tenants to abandon malls at the same time as large specialty chains like Victoria’s Secret are shrinking.

Malls were already facing pressure from online shopping, but analysts now say that hundreds are at risk of closing in the next five years. That has the potential to reshape the suburbs, with many communities already debating whether abandoned malls can be turned into local markets or office space, even affordable housing.

“More companies have gone bankrupt than any of us have ever expected, and I do believe that will accelerate as we move through 2020, unfortunately,” said Deborah Weinswig, founder of Coresight

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Research, an advisory and research firm that specializes in retail and technology. “And then those who haven’t gone bankrupt are using this as an opportunity to clean up their real estate.”

Ms. Weinswig said the malls that are able to withstand the current turmoil will be healthier — better tenants, more inviting and occupied — but she anticipated that about 25 percent of the country’s nearly 1,200 malls were in danger. Most retailers that have filed for bankruptcy are closing stores but plan to continue operating.

J.C. Penney plans to close as many as 250 stores starting this summer.

Department stores account for about 30 percent of the mall square footage in the United States, with 10 percent of that coming from Sears (which filed for bankruptcy in 2018) and J.C. Penney, according to Green Street Advisors, a real estate research firm. J.C. Penney, which declined to comment, has said store closings will start this summer and could eventually number as many as 250. Green Street forecast in April that more than half of all mall‐based department stores would close by the end of 2021.

That will have significant effects beyond reduced customer foot traffic. Many small mall retailers have clauses in their leases — so‐called co‐tenancy clauses — that allow them to pay reduced rent or even break the lease if two or more anchor stores leave a location.

“At a lot of lower‐quality malls, where maybe there already is a vacant anchor, where you’ve got the Sears box that closed two years ago and not yet filled it, and now your J.C. Penney box is closed — that is going to cause that mall to likely lose a lot of tenants and possibly even lose its competitive positioning very quickly,” said Vince Tibone, a retail analyst at Green Street.

Mr. Tibone said he was pessimistic about the ability of most malls to fill vacant spaces, especially during the pandemic. Entertainment options like Dave & Buster’s are off the table, for instance. “The reality is there are going to be dark boxes for some time,” he said. Neiman Marcus is one of the most prominent department stores to file for bankruptcy during the pandemic.

And then there are customers, who already shop online in huge numbers and may not be all that eager to return to enclosed emporiums where they will be surrounded by other people. “If there’s a perception out there that people are safer outside and less safe inside, that’s not great,” said Matthew W. Lazenby, chief executive of Whitman Family Development, which manages the luxury open‐air Bal Harbour Shops outside Miami.

Even before the pandemic, American shopping malls were seeing their fortunes diverge. While malls in affluent areas with high‐end stores and restaurants generally thrived, lower‐tier malls, particularly those with competitors nearby, suffered over the years as retailers winnowed their physical stores and filed for bankruptcy. Macy’s, which also owns Bloomingdale’s, said in February that it would close 125 stores in “lower‐tier malls” during the next three years, and Nordstrom just recently said it would close 16 of its 116 full‐line department stores. While Neiman Marcus, which filed for bankruptcy in May, said it plans to reopen all its stores, landlords are watching warily. Matthew W. Lazenby is chief executive of Whitman Family Development, which manages the luxury open‐air Bal Harbour Shops.

Brad Schlossman, chief executive of West Acres Development, where he oversees the popular West Acres mall in Fargo, N.D., which was founded by his father, said Sears was the mall’s first tenant and it had a lease that, including renewal options, had a 45‐year‐term that ran out in 2017.

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Since Sears exited, the mall has been trying to redevelop the space, installing a Best Buy and trying to attract restaurants, though those plans may be put on hold depending on which tenants are able to pay rent in the near future.

Mr. Schlossman is optimistic about West Acres, partly because it is the only major mall in an area where the weather favors enclosed spaces. But he anticipates greater struggles in places where there are clusters of malls. “We are it in our community, so we don’t have that same either cannibalization or struggle to attract tenants because we’re competing against another mall,” he said.

As of June, 84 percent of the country’s 1,174 malls were considered healthy, reporting vacancy rates of 10 percent or less, according to the CoStar Group, a data provider for the real estate industry.

But that compares with 94 percent in 2006. And the percentage of healthy malls is expected to drop further as retailers carry out store closings announced this year, accounting for more than 83 million square feet of retail space. A significant percentage of that comes from apparel stores, which represent about 60 percent of occupied mall space.

Major mall operators have started to signal concern. The Simon Property Group, the biggest mall operator in the United States, is trying to terminate its $3.6 billion deal to acquire Taubman Centers, which owns and operates about two dozen high‐end shopping centers.

In court filings last month, Simon Property said that Taubman’s malls were mostly enclosed, and that indoor malls “are the last types of retail real estate properties that most consumers will want to visit on a long‐term basis after Covid‐19.” (Simon Property also owns many enclosed malls.) While Taubman has promoted its wealthy, educated shoppers as an asset, Simon Property said that those consumers, in particular, are now “far more able and likely to use online shopping.” The sides have been ordered to enter mediation but if an agreement isn’t reached by the end of the month, they will go to trial. CBL & Associates Properties, which owns and operates roughly 60 malls, outlet stores and open‐air shopping centers in the United States, said in filings last month that it was skipping about $30 million in interest payments due in June “to advance discussions with its lenders and explore alternative strategies,” and that there was “substantial doubt” it would continue to operate as a going concern. “Is there going to be more distress, vacancy and bankruptcy? Yes,” one investor said.

Jim Hull, the owner and managing principal of the Hull Property Group in Augusta, Ga., which oversees 30 enclosed malls, expressed frustration about the exit of big national chains from “smaller or tertiary markets.” The result, he said, is that “the majority of people living in the smaller markets will either have to buy from the internet or have to drive 45 miles,” he said. Already this year, Victoria’s Secret said it would close 250 stores in North America, while the Gap brand is closing at least 170 stores globally. Financial troubles are plaguing mall chain companies like Ascena Retail, which owns Ann Taylor and Loft, and the owner of New York & Company. And bankruptcies since early 2019 have included mall staples like Forever 21, Things Remembered, Payless ShoeSource and GNC. Lucky Brand Dungarees filed for bankruptcy on Friday.

Mr. Hull said that he anticipated making malls more “community‐based” in smaller markets, with local and regional businesses. “It’s going to be cooking classes, boutiques, internet businesses that want a physical presence, health care, food choices,” he said.

In Cupertino, Calif., where Apple has its headquarters, the fate of the shuttered Vallco Shopping Mall has become a contentious issue, with impassioned public debates around replacing it with affordable housing, new entertainment and retail options or office space. 9

In the meantime, it is a partially demolished eyesore, according to Rod Sinks, a member of the Cupertino City Council. “We have a chain‐link fence around the whole thing,” he said.

In Los Angeles, the former Westside Pavilion mall, once featured in the movie “Clueless” and Tom Petty’s “Free Fallin’” music video, is turning into office space for Google. Terri Tippit, the 74‐year‐ oldchairwoman of the local Westside neighborhood council, lamented the loss of the space and said it“ reflected the way our society is changing and going.”

Still, some investors have bought midtier malls in recent years and have already been working on how to repurpose and change spaces — even “de‐malling” malls, by flipping store entrances so that they face the street. “We didn’t buy malls since 2014 thinking that J.C. Penney or Sears or Bon‐Ton were going to be in business forever and operate department stores, and if you were, then shame on you,” said Ami Ziff, director of national retail at Time Equities, a real estate firm whose investments include eight enclosed malls. “Is there going to be more distress, vacancy and bankruptcy? Yes. Hopefully, you know what you’re doing so you can pick up the pieces to refill that space.”

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Macy’s Lays Off Nearly 4,000 Employees

Jordan Valinsky June 25, 2020

Key Takeaways:

 Covid‐19 has negatively impacted major retail stores, requiring them to layoff 3% of their workforce.  Macy’s lost $969 million in the first quarter of 2020.  Sale for Macy’s are expected to drop 45%

Macy's is cutting roughly 4,000 back‐office and management jobs as Covid‐19 continues to hurt its bottom line. The layoffs, which account for 3% of Macy's workforce, will save the company around $630 million annually. Macy's is reopening many of its stores across the United States, which the company previously said are performing better‐than‐expected. "Covid‐19 has significantly impacted our business," Macy's CEO Jeff Gennette said in a statement Thursday. "While the reopening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales." The company also announced that many of its furloughed employees will be brought back in the first week of July. Macy's placed a majority of its 125,000 employees on furlough in March following the temporary closures of its stores following the start of the pandemic. Stores began reopening in early May as states lifted their stay‐at‐home orders. Macy's is set to release its first‐quarter results on July 1. Macy's expects an operating loss of around $969 million between February and May, which is slightly lower than the $1.1 billion it was originally forecast to lose. Still, the first quarter will be dismal compared to the same quarter a year ago. Macy's expects sales to fall 45% to $3 billion and it's expecting a quarterly net loss of $652 million. It raked in a $136 million quarterly net gain for the same time period in 2019.Macy's, which also owns Bloomingdale's and Bluemercury, has around 775 stores in the United States.

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Sale of Meriden mall prompts closer look from city officials

Mary Ellen Godin June 9, 2020

Key Takeaways:

 The Westfield Meriden mall in CT was purchased after closing temporarily due to financial loss.  The owners of the mall intend to transform the mall into a residential and entertainment space.  Malls have access to transit and are prime real estate for residential areas.  The mall was previously the town’s second highest source of tax income.

MERIDEN — The Namdar Realty Group paid $12.5 million for the former Westfield Meriden mall in a cash transaction last week that has city officials concerned. The mall property is assessed at $52 million and appraised at $75 million, according to city records. The comparatively low sale price has led city officials to examine survey maps and documents in City Hall to see precisely what was included in the sale. They are hoping more documents are forthcoming.

“I was quite surprised to see those numbers,” said City Council Majority Leader David Lowell, who chairs the Economic Development, Housing and Zoning Committee. “For me, it raises suspicion because of the disparity. The outcome (on the city’s Grand List) is significant if they try to appeal their assessment based on that price. But it’s premature to judge it. We don’t have any documentation I’m aware of. I’m waiting on good faith information from both parties.” Prior to the sale, Westfield Meriden was the city’s second‐highest taxpayer, behind Eversource, and makes up 1.7 percent of the city’s total collected taxes. Namdar representatives said they do not discuss acquisition prices, but want to work to improve the mall.

“The Meriden Mall is a centrally‐located shopping destination, and we were excited by the property’s potential. We feel that the Meriden Mall is at a crossroads, and we have the experience and capabilities to bring the property into the next phase of its life cycle,” Elliot Nassim, of Mason Asset Management and Namdar Realty Group, said in a statement. Nassim added that neither the vacant Sears nor Macy’s stores were included in the sale, but the company is “committed to working with both brands to suggest some of the concepts that have worked in these types of malls in the past,” the statement continued. Mayor Kevin Scarpati said he has been in contact via email with representatives from Namdar and a meeting is imminent. He agrees with Lowell that the deal demands more scrutiny.

“I think we need to wait and see what all the documents show,” Scarpati said. “I’m excited for a change. It’s clear, Westfield has not invested in the Meriden mall for several years. We need a partner who is willing to invest. It can give us much needed growth and opportunity.”

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The Westfield Meriden purchase is among seven Namdar made this year, bringing its total portfolio to more than 55 malls across the country, primarily in the Northeast, the Midwest and the South. Namdar has a strategy of purchasing average to lower performing malls and leasing them at low rents to maintain tenants, according to media reports. Namdar also owns the Enfield Mall and recently won town approval to subdivide the struggling center to attract tenants. Company officials said they are currently working on a strategy to improve the Enfield mall and will reveal details when they are available. City Councilor Daniel Brunet, who is also a member of the Economic Development, Housing and Zoning Committee, said the low sales price doesn’t necessarily trigger an appeal. “I do not believe an appeal is imminent,” Brunet said. “There are several market forces that drive an actual sales price that are unrelated to the appraised value.” City Economic Development Director Joe Feest said he had meetings with Westfield general manager Chris Powers, who reassured him the new owners were eager to invest. “Regardless of the valuation, $12.5 million is still a significant investment in the property,” Feest said. “Hopefully new life will be brought into the mall. If you’re going to spend, you’ll rejuvenate it and make it succeed. Not relating it to the value, it’s a decent chunk of change. We’re hoping for good things.” During a conversation with Feest prior to the sale, Powers indicated Namdar is a bigger player in the U.S. mall industry. Feest will be meeting with the owners and its management team — Mason Asset Management — to discuss future plans. The transaction was recorded in city land records Monday, according to information in the City Clerk’s office. The Sears property transferred to an Illinois partnership, TF Meriden LLC, in March of last year.The shopping center will be rebranded as the Meriden Mall.Namdar, founded on Long Island, N.Y., in 1999, is a privately‐held commercial real estate investment firm that owns and operates some 31 million square feet of commercial real estate throughout the U.S. Westfield Meriden mall was struggling prior to the pandemic and state executive orders that forced it to close temporarily in March. Sears shuttered two years ago, and Macy’s closed just before the pandemic hit the region, proving that department stores were facing uphill battles, said John Clapp, a retired finance/real estate business professor at the University of Connecticut School of Business. Clapp works with local governments to help malls adapt by changing zoning to high‐density residential or entertainment and recreation. Most malls are in prime locations, near highways or transit centers.He said the probability that Namdar would apply for a reduced tax assessment is “almost certain” and said he hopes state economic development officials “will do some planning for the large amount of vacant retail space in Connecticut.”

“This is a perfect time to develop policies for this type of problem,” he said. The city has anticipated potential swings from retail to other uses at the mall property by implementing flexible zoning in its most recent Plan of Conservation and Development. Clapp said the city is moving in the right direction and Feest has expressed optimism about the mall’s potential to redefine itself. We would always love to see a restaurant, movie theater. A college could use it,” Feest said about the Macy’s closure in March. “It does open up other avenues because of the size.”

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Will the Retail Apocalypse Crush Simon Property Group?

Matthew DiLallo July 8, 2020

Key Takeaways:

 In 2019, the rate of retail closures increased by 59%.  Younger generations are spending more money on experiences rather than material goods.  To remain a functioning business, Simon Property Group invested in retail, office and entertainment space in their malls.

Brick‐and‐mortar retailers have been under increasing pressure as more consumers shift their shopping online. Many have shuttered locations that aren't generating enough retail sales to turn a profit. Meanwhile, some have closed up shop entirely after declaring bankruptcy. The shrinking retail footprint is having a significant impact on owners of retail real estate, like real estate investment trusts (REITs). Several might not survive. Because of that, it's a very challenging time for investors in retail REITs.

What is the retail apocalypse? The retail apocalypse refers to the dramatic reshaping of the retail industry in America. In 2019, retailers closed more than 9,000 stores, a staggering 59% increase from the previous year. The number of retail store closures will likely balloon further in 2020 due to the impacts the COVID‐19 outbreak had on the retail sector as many governments forced nonessential retailers to close their doors to slow the spread. Unfortunately, many never reopened as the pandemic caused even more retail store bankruptcies. While the rise of online shopping often gets the blame for the retail apocalypse, it's not the only factor. Many retailers are struggling under the weight of debt because of a leveraged buyout or aggressive expansion. In addition to that, consumer spending has changed, with younger generations favoring using their disposable income to buy experiences instead of purchasing material goods. Many retailers have been slow to adapt to these changes, causing them to struggle. How the retail apocalypse is impacting Simon Property Group Regional malls have been one of the hardest‐hit property groups by the retail apocalypse. The subsector was the worst performer among all REITs in 2019, with that underperformance carrying over into 2020 as COVID‐19 accelerated the retail apocalypse. The downturn hasn't spared leading mall REIT Simon Property Group (NYSE: SPG), as its stock slumped 11% in 2019 before tumbling another 55% during the first half of 2020. One factor weighing on Simon Property's stock is the impact store closings have on occupancy levels and rental rates at its malls. For example, occupancy fell from 95.9% at the end of 2018 to 95.1% at the end of 2019. Meanwhile, base minimum rent per square foot barely budged, rising from $54.18 to $54.59, which was less than a 1% increase.

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Unfortunately for Simon, market conditions have gone from bad to worse this year as it had to temporarily close its malls to help slow the spread of the COVID‐19 outbreak. Because of that, many of its tenants didn't pay their rent. While Simon has sued some for back payment and is working out deferrals with others, many of its tenants won't survive as they'll likely file for chapter 11 bankruptcy protection. Because of that, Simon recently reduced its dividend and abandoned a deal to buy rival mall owner Taubman Centers (NYSE: TCO). How Simon Property Group is responding to the retail apocalypse Simon Property has gone on the offensive to shield its malls from the retail apocalypse's full force. It has invested $8 billion over the past eight years to transform its properties into live, work, play, stay, and shop experiences, adding office space, residential units, and hotels to its shopping malls. It has also redeveloped retail space to serve the needs of experiential tenants like restaurants and entertainment venues and brought in new retail concepts like online retailers. The company had planned to invest as much as $5 billion in more redevelopment projects over the next five years. While it has deferred many of these projects because of the COVID‐19 outbreak, it will likely move forward with most as conditions improve. Simon has also taken an active role in making sure many of its tenants survive. The company has partnered with fellow mall owner Brookfield Asset Management (NYSE: BAM) to buy Aeropostale and Forever 21 out of bankruptcy to revitalize those brands so that they can continue renting space in their malls. The company has also considered making bids on other bankrupt retailers, including J.C. Penney (OTCMKTS: JCPNQ) and Lucky Brand, seeing a real estate redevelopment opportunity with the former's department stores and a revitalization candidate with the latter. One reason Simon has been able to go on the offensive during the retail apocalypse is that it has a top‐ notch balance sheet, including A‐rated credit. That gives it the financial flexibility to make investments to reposition its real estate for the future of retail. Simon Property Group will be a retail apocalypse survivor There's no doubt that the retail apocalypse is having an impact on Simon Property. However, it won't deliver a crushing blow to the company like it has for other mall REITs. That's because the company has a top‐notch balance sheet and a plan to transform its high‐quality retail real estate portfolio into popular mixed‐used destination properties. While this shift will take time, and the company will likely experience some bumps in the road, Simon Property has the resources and strategy needed to thrive in a post‐retail‐apocalypse world.

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Dying shopping malls can make room for new condos and apartments, helping ease the housing crisis

ANDREW KHOURI

September 29, 2019

Key Takeaways:

 In California, real estate developments have been transforming their retail properties into affordable housing to battle the housing crisis.  In the next few years, many malls will be forced to change their services to remain open.

In the San Fernando Valley, there are plans to level a nearly vacant mall and replace it with some 1,400 homes, boutique retail shops and a concert venue. In Orange County, an aging mall will give way to a mixed‐use development with more than 900 homes. And in the South Bay, hundreds of homes are planned to replace a struggling mall that opened in the mid‐1980s. An old adage implores investors to “buy land; they’re not making it anymore.” But in a way, in cities across the country, they are. Acres of prime real estate are opening for redevelopment as America’s malls struggle to compete with Amazon and other online giants, offering developers a rare shot to remake swaths of land in the country’s built‐out metropolises. In particular, real estate experts say, the demise of retail centers provides one of the best chances to add needed housing in California’s urban regions, where a shortage has left nearly 30% of renters in the state paying more than half their income on housing. “It’s a huge opportunity — probably one of the biggest,” said Adam Artunian, a vice president with John Burns Real Estate Consulting in Irvine. The redevelopments are likely to face hurdles from residents concerned over the changing character of their neighborhoods, but as Americans increasingly buy T‐shirts, purses and electronics online experts say something needs to be done with all the massive retail centers that popped up during the postwar era before they become neighborhood blights. A recent report from Credit Suisse predicted the trend will result in 20% to 25% of America’s malls closing in the next five years. To stave off that fate, some owners are redeveloping their properties into destinations that try to give shoppers a new reason to venture outside. There’s an emphasis on experience and typically more restaurants and outdoor boutiques, as well as community spaces that can hold concerts and other events. Housing is key too. “You don’t have to reach out to your customer base, because they live right there,” said Cynthia Murphy, who oversees mall leasing nationwide for commercial real estate brokerage CBRE Group.

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Major projects have been proposed in the San Fernando Valley, South Los Angeles, the South Bay and Orange County that would add more than 4,000 housing units where none previously existed. And it’s not just Southern California. In the San Francisco Bay Area town of Richmond, a real estate investment firm is looking to add as many as 9,600 homes when it redevelops the struggling Hilltop Mall. Elsewhere, there are projects in the suburbs of Chicago, Philadelphia and New Orleans, just to name a few. George Hoglund, an analyst with investment banking company Jefferies, predicted many of the nation’s 1,200 large malls will be reworked over the next five to 10 years. “I would say a couple hundred of them,” Hoglund said. In Woodland Hills, shopping‐center giant Westfield Corp. is seeking approval to level the Promenade mall built in 1973 and start anew. Last fall, it rolled out plans to build residences, offices, two hotels and a concert venue, along with a string of boutiques and restaurants. A website pitching the proposal depicts tree‐lined avenues, a central park and courtyards. The $1.5‐billion project, if approved, will connect to Westfield’s two adjacent properties — the indoor Topanga mall and the Village, a $350‐million outdoor shopping center that opened two years ago. On a recent Sunday afternoon, the Village was packed with people eating at restaurants and strolling through boutiques. A rock band even played, setting up in front of Lucille’s Smokehouse Bar‐B‐Que. Across the way, the Promenade’s parking lot was largely empty. The indoor mall and Macy’s have closed and only the movie theater, a few restaurants and a book store were open. Around noon, just two shoppers browsed for a deal on books after passing a sign that announced a “Store Closing Sale!” and another that informed them the entrance to the indoor mall was “no longer available.” Larry Green, a senior vice president with Westfield, said the company knew it needed to redevelop the 34‐acre property even before online shopping took off, citing the consolidation of department store anchor tenants. “It wasn’t that long ago, here in Los Angeles, there were 10‐plus department stores,” Green said. “The consolidation has happened over decades and it’s going to continue, but it allows us to do some really good things and to create urban communities.” Changes are proposed even for more successful properties such as the Baldwin Hills Crenshaw Plaza in South Los Angeles. Capri Investment Group, which purchased the property on behalf of investors in 2006, wants to keep the mall, but add apartments, condos, a hotel, offices and an outdoor retail strip that evokes Santa Monica’s Third Street Promenade. Capri Chief Executive Quintin E. Primo III said the mall is doing better than most following a multimillion‐ dollar upgrade. There also aren’t many competing shopping or dining options in the largely African American neighborhood. Many investors have long shunned the area, he said, despite the middle‐ and upper‐class residents who live in nearby Leimert Park, View Park and Baldwin Hills. But online competition is biting into sales and last year the center’s Wal‐Mart was shuttered. Primo said he doesn’t want to wait around until the mall truly struggles. “If malls do not reinvent themselves, in some shape and form, they die,” he said. “We see the tsunami coming.” Adding multifamily housing — a coveted investment class — should also make it easier to attract capital to complete the massive project off Crenshaw and Martin Luther King Jr. boulevards. “We think it is a great value to the community,” he said. “To have this all within walking distance and not have to travel. It improves the quality of life for all residents.” When it comes to adding the housing, the properties provide an opportunity to add lots of units without too much work. That’s a rarity in largely built‐out corners of Southern California where “all the easy deals are gone,” said Bob Patterson, a first vice president with CBRE.

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Typically, builders must build small or put together four parcels with five owners to get “something of scale,” he said. Malls, though, sit on vast acreage and are often surrounded by a sea of surface parking lots, enabling developers to build hundreds of homes without demolishing anything. In the San Fernando Valley, Westfield’s Promenade plans call for roughly 1,400 apartments in several buildings, ranging from studio units to much more luxurious spreads. In Orange County, Merlone Geier Partners is transforming the 68‐acre Laguna Hills Mall into a mixed‐use development known as Five Lagunas with more than 900 apartments. The property is half demolished, but is currently on hold as the developer figures out how to reorient the design after Macy’s recently decided to close there. And at Capri’s 43‐acre Baldwin Hills Crenshaw Plaza, more than 900 apartments and condos are planned. Ten percent would be priced below market rate after residents voiced concern that the development will make the area more attractive to those of higher incomes and put upward pressure on rents in the surrounding area, even as the housing supply expands. While the redevelopments present an opportunity, there are still challenges. The malls are typically adjacent to traditional single‐family neighborhoods designed to accommodate residents driving to the nearby retail centers on wide‐open streets. In an increasingly gridlocked region, the projects for many represent a further erosion of the suburban ideal they bought into. In Redondo Beach, the city’s Community Development Department several years ago noted the indoor South Bay Galleria represented an “antiquated model of shopping centers where islands of retail structures are surrounded by vast parking areas.” Labeling the indoor mall “over parked,” the department said the 30‐acre site was the one that held the “greatest potential” in the city to add new homes — 1,467 residences under current zoning as part of a mixed‐use development. But mall owner Forest City rolled out less ambitious plans for a redeveloped South Bay Galleria a few years ago, that called for a maximum of just 650 units. In response, nearby residents protested over the potential effect on traffic. An opposition group was set up — Residents Against Galleria Expansion, or R.A.G.E. And on Tuesday, in response to community pushback, Forest City announced it would go with its smallest proposal — one that contains only 300 units. California’s tax structure could also complicate the projects. Because Proposition 13 limits how high property taxes can rise, many cities take in much of their revenue from sales taxes. That in theory gives a city less of an incentive to allow an entire mall property to turn over into housing, fearful of taking the double hit of losing tax revenue and adding new residents that increase costs for the school system and public safety. Los Angeles developer GPI, which has built mixed‐use projects in Pasadena, Beverly Hills and elsewhere, has even experienced pushback when its proposals included some retail, but less than what previously existed, said Cliff Goldstein, the company’s managing partner. Large cities with a diverse tax base such as Los Angeles are more willing to allow the redevelopments, including GPI’s NoHo West project under construction in North Hollywood, Goldstein said. The project will add 642 homes on the site of the former Laurel Plaza, an outdoor shopping center that fell on hard times.

Smaller cities face an even bigger hit to their revenues from any loss of retail space. But Goldstein says even they are coming around. “If they believe that it will help preserve the shopping center, then I think they are beginning to understand,” he said.

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If N.J. malls want to survive, turn their crumbling parking lots into housing, expert says

Bill Duhart June 27, 2020

Key Takeaways:

 Malls in New Jersey have begun to transform their malls into residential spaces.  The parking lots of malls have a lot of value that can be capitalized on.  Other countries have successfully changed their malls into successful living and entertainment spaces that generate profit.

As malls in New Jersey prep to reopen next week some will already have an advantage. Super retail centers like Westfield Garden State Plaza not only have an economy of scale as the second‐ largest mall in the state behind the stalled American Dream, it also launched a plan over a year ago to morph into a mixed‐use town center infused with a residential community. “Malls’ greatest assets are the crumbling parking lot around it,” said Paco Underhill, a retail sales expert and founder of Envirosell, a New York firm that studies and analyzes business trends. “U.S. shopping malls are outdated compared to other parts of the world. Most U.S. shopping malls have no supermarkets and nobody living there. In other parts of the world, people live work and play around shopping centers.” Rich LaBarbiera, the mayor of Paramus, where Garden State Plaza is located, knows just what Underhill is talking about. “I been out to Texas and some of these old IBM campuses that they repurposed and turned into one‐ stop shopping lifestyle,” LaBarbiera said. “You see some incubator companies, startups – young people walking down from their apartments to go get coffee, run and get haircuts – it’s not a bad lifestyle if you think about it.” LaBarbiera said Paramus approved zoning changes around its three malls ‐‐ Westfield Paramus Park and Outlets at Bergen Town Center ‐‐ to include housing and to help meet its state affordable housing obligation. The plan for Westfield includes up to 400 apartment and condo units above retail stores, some of which will be set aside for low‐to‐moderate income units. The final phase of the project will be the residential neighborhood, which will feature tree‐lined streets and a promenade. A public park will be a centerpiece and lead to an open‐air plaza and adjoining fields. Ninety‐one miles south of Westfield Plaza lies the Moorestown Mall. It has a fraction of the worth of Garden State Plaza, which is located 15 miles west of New York City, sandwiched between busy Route 17, 4 and Garden State Parkway, and widely considered to be among the most profitable malls in America. Moorestown, at just over 1 million square‐feet is half the size of it. Moorestown is part of a portfolio of malls for PREIT, which owns 17 malls, with concentrations in and around Philadelphia and Washington D.C. But Moorestown appears to have taken a page out of the Paramus playbook. It recently changed zoning around its 83‐acre mall to include housing and to satisfy its affordable housing planning obligation. 19

It also has a similar plan to redesign an anchor property vacated by Macy’s into four stores. But unlike Westfield, which is owned by a French company, Unibail‐Rodamco‐Westfield, PREIT had announced plans to sell the 83‐acre Moorestown property and lease it back before the COVID‐19 shutdowns in March. The plan was to improve its financial standing.

Since the shutdowns, it sought and received millions in federal Payroll Protection Plan dollars and is seeking up a $25 million tax abatement this year in Moorestown, Cherry Hill and Vineland, where it owns the Cumberland Mall. “PREIT’s request for PPP funds is one of many actions the company took to strengthen our balance sheet and maintain liquidity amidst suspended operations due to COVID‐19,” Heather Crowell, PREIT’s executive vice president of strategy and communication said in an email this week. “Like many businesses, PREIT was suddenly faced with new business hurdles due to COVID‐19 closures. As large taxpayers, we are happy to participate in funding critical infrastructure. We have worked cooperatively with municipalities across our portfolio to defer tax payments while operations are halted.” PREIT wants to transform the Moorestown Mall into an entertainment and town center destination but has been at odds with Moorestown over how much housing is planned and if it will mean the demolition of some of the existing mall to build it. “There are lots of things this property could be used for,” said Moorestown Mayor Nicole Gillespie. “We want to allow things to be built there that currently can’t be. We don’t have concerns about the ongoing viability of that property. Everybody recognizes that we need to adapt. What we adapt to is still the question.” The Moorestown Mall is located 4 miles from Interstate 295 and the New Jersey Turnpike Exit 4. Moorestown and Westfield Garden State Plaza are both scheduled to reopen on Monday. Some other mall redevelopments around the state include: The 60‐year‐old Monmouth Mall in Eatontown has for three years been trying to redevelop itself into The Heights at Monmouth, a place to live, work and play; It will have 700 apartments, new shops, dining and entertainment and a 115,000 square foot medical facility The former Echelon Mall, now known as the Voorhees Town Center, has a plan to bring the 664,000 square foot mall back to life calls for food courts, laser tag, sports bars and outdoor movie nights when weather allows. The new owner Brandywine Financial Corp. will build 180 townhouses, 120 age‐ restricted senior apartments and 70 market‐rate apartments. Up to 20% of the 370 units will be low‐to‐ moderate income affordable housing.

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Retail store closings 2020: A list of chains that have closed stores amid the coronavirus pandemic

July 3, 2020 Nicolette Accardi

Key Takeaways:

 During the Covid‐19 pandemic, retail stores were forced to close their doors, resulting in irreversible financial loss.  Previously successful retail stores are filing for bankruptcy and many will close their doors.  The closing of retail stores will leave malls vacant.

The brick‐and‐mortar retail industry has had a rough few years, and now the coronavirus pandemic is causing even more turmoil. Over the last several weeks, many major retail chains have announced permanent store closings and filed for Chapter 11 bankruptcy. Others have reported significant financial losses. Here’s a look at all the retailers that have had the coronavirus pandemic impact stores permanently. 24 Hour Fitness Gym chain 24 Hour Fitness announced in June it has filed for Chapter 11 bankruptcy and will permanently close more than 130 gyms, including seven in New Jersey. The company says the bankruptcy filing is due to the “disproportionate impact of the COVID‐19 pandemic.” That will leave just five 24 Hour Fitness gyms left in New Jersey, located in Englewood Cliffs, North Brunswick, Paramus, Ramsey and Springfield. All remain temporarily closed. AT&T Wireless carrier AT&T is planning to permanently close more than 250 of its stores and cut at least 3,400 jobs nationwide. AT&T cited the economic impact and change in customer behavior due to the coronavirus pandemic as reasons for the store closures, according to a report by Business Insider. There are currently 172 AT&T stores in New Jersey, along with 32 Cricket Wireless stores. Bath & Body Works The beauty brand’s parent, L Brands, announced in May that 51 stores in the U.S. and Canada will shutter this year. There are currently 1,635 Bath & Body Works stores in the U.S., according to company’s website. Fairway Market The Paramus location closed in May after Amazon purchased it following the supermarket chain’s Chapter 11 bankruptcy filing earlier this year. Gap The clothing company indefinitely suspended rent payments in May (about $115 million per month in North America) and said some stores may permanently close. There are 28 Gap stores in New Jersey and 1,700 worldwide, according to the company’s website. 21

The company has told its vendors to stop shipping items for its summer and fall seasons. Items for the summer season will only be accepted if they are for online sales. Gap already had shuttered two New Jersey stores in January, along with dozens worldwide. GNC The nutrition supplement retailer filed for Chapter 11 bankruptcy in June and plans to close up to 1,200 stores, including at least 10 in New Jersey, as the company searches for a buyer. There are currently over 100 GNC stores in New Jersey, including Rite Aid licensed store‐within‐a‐store locations, according to the company’s website. Gordmans Gordmans parent, Stage Stores, filed for Chapter 11 bankruptcy in May with plans to liquidate its stores. New Jersey locations are in Pennsville, Brown Mills, Bridgeton, Rio Grande and Seaville. JCPenney JCPenney plans to permanently close 168 stores after filing for bankruptcy amid the coronavirus pandemic. (Dan Gleiter | [email protected]) The department store chain plans to permanently close 168 stores after filing for bankruptcy amid the coronavirus pandemic. There are currently 11 JCPenney stores in New Jersey, according to the company’s website, but none are on the list of stores that will permanently close — as of now, at least. Liquidation sales began June 17, while others were scheduled to start in time for the Fourth of July holiday weekend. JCPenney is currently offering up to 85% off on clearance items online, but it appears to be a Fourth of July promotion and not related to any liquidation sales. Microsoft Computer and technology giant Microsoft announced plans to permanently close almost all of its 82 retail stores. There are currently three Microsoft Stores in New Jersey: Bridgewater, Freehold and Paramus. Neiman Marcus High‐end department store Neiman Marcus filed for Chapter 11 bankruptcy in May and “will continue to assess store closure decisions,” according to a statement. There are currently two Neiman Marcus stores in New Jersey: one at Westfield Garden State Plaza in Paramus, and another in The Mall at Short Hills. In March, Neiman Marcus announced it would close most of its Last Call stores to focus on full‐priced luxury sales instead of discount offerings. Nordstrom Nordstrom has announced plans to reopen all of its stores in Ohio this month Nordstrom announced in May plans to permanently close 16 of its department stores, including its Freehold Raceway Mall location. There are currently 116 Nordstrom department, according to the company’s website, including five in New Jersey. Nordstrom is currently offering clearance items for up to 60% off online. Party City Party City has plans to permanently close 21 stores this year. The company said in a statement it is part of a “store optimization” plan that began in 2019 with 55 store closures, including one in New Jersey after a disappointing Halloween season. There are currently 26 Party City stores in the Garden State. Pier 1 Imports

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The home decor retailer announced in June it has received approval from bankruptcy court to shutter and liquidate all of its roughly 540 stores, including its e‐commerce operations. There are currently 16 Pier 1 Imports stores left in New Jersey, according to the company’s website. All store closings and liquidation sales will conclude by the end of October. Pier 1 Imports also is shutting down its online store. Sears Sears is shuttering its Rockaway and Hackensack stores for good. Once these two locations shutter, Sears will be left with just one department store in New Jersey: Newport Centre in Jersey City, located at 50 Mall Dr. West. The struggling company filed for Chapter 11 bankruptcy in October 2018 and has experienced many store closures since then. Signet Jewelers Signet Jewelers, the parent company of the brands Kay Jewelers, Piercing Pagoda and Zales, revealed in June that about 380 U.S. and Europe stores will permanently close. Stores in declining malls will be impacted the most. The company currently operates 79 jewelry stores in New Jersey, but it’s unknown if any will close. Starbucks Coffee giant Starbucks announced in June it will close up to 400 company‐operated stores over the next 18 months. There are over 250 Starbucks locations in New Jersey, but it is unknown if any will be impacted. The Children’s Place Kids clothing retailer The Children’s Place announced in June plans to close 300 stores over the next 20 months to “dramatically” reduce its brick‐and‐mortar portfolio. The Children’s Place stores will mostly be leaving malls, with about 200 stores closing this year and 100 in 2021. There are 17 The Children’s Place locations in New Jersey. The company is currently holding an online sale with clearance items over 75% off Tilton Fitness Gym chain Tilton Fitness announced in June it has permanently closed due to the financial impact of the coronavirus pandemic. Tilton Fitness had locations in Brick, Edgewater, Galloway, Hazlet, Jackson, Manahwakin and Northfield. It was also planning to open a new fitness center in Atlantic City. Victoria’s Secret Victoria’s Secret announced in May it will permanently close about 250 stores in the U.S. and Canada this year. There are more than 1,000 Victoria’s Secret stores in the U.S. and 42 in New Jersey, according to the company’s website. L Brands, Victoria’s Secret parent, said it is “closely evaluating all locations, especially more vulnerable centers for risk of closure,” according to the company’s quarterly earnings report. Last year, Victoria’s Secret shuttered dozens of stores nationwide, although none in New Jersey were affected. Zara Inditex, the parent company of fashion brand Zara, announced in June plans to close up to 1,200 stores worldwide by the end of 2021. The closings will be “stores at the end of their useful life” and “whose sales can be recovered in nearby stores and online,” the company said. About 100 stores in North and South America will close. There are currently six Zara stores in New Jersey, but it is unknown if any will be impacted.

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Malls Survived The Retail Apocalypse, But Coronavirus Threatens To Be Their Armageddon

March 30, 2020 Pamela N. Danziger

Key Takeaways:

 97% brick and mortar retail executives have closed some of their businesses.  96% of retailers have sought out rent abatement from mall landlords to maintain their business.  An estimated 15,000 retail stores in the United States will close in 2020.

On Sunday President Trump announced that federal social distancing measures will continue through the end of April. While he said that details of the extended recommendations would follow on Tuesday, it is likely that all non‐essential stores, including malls, will remain closed till then. These are necessary steps to save people’s lives, yet it may result in the death of many retailers. Malls, in particular, are at most risk in these days of social distancing, which is why I see a retail Armageddon on the horizon. Forget the retail apocalypse, let’s talk Armageddon Since church is canceled, here’s a brief Sunday School lesson. In the Book of Revelations, the apocalypse is the series of prophetic events that lead up to the final battle between good and evil. That’s Armageddon, which many say will take place in the city of Meggido, Israel. Retail faces a doomsday scenario of biblical proportions now. Major national retailers largely ignored the prophetic warnings of the retail apocalypse and now face the final battle that will occur in the nation’s 1,200 malls, retail’s Meggido. Already, RetailNext reports that 97% of the 450 brick‐and‐mortar retail executives it just surveyed have closed some or all of their doors. How many of those stores are located in malls is undetermined, but it stands to reason that a vast majority have significant mall exposure, since malls are filled with non‐ essential retail businesses which have been forced shut vs. essential ones that have remained open. Facing another month of closures, 96% of the retailers surveyed are seeking rent abatement from landlords. At least one major mall owner, Taubman, has publicly nixed any such concessions in a letter to tenants. “Landlord's obligation to pay its lenders, utility companies, insurance companies and the like, to ensure the safety and security of the building and maintain the appropriate level of operations, remains,” USA Today reported. “The rental income that we receive from Tenants is essential in order to meet these obligations. All Tenants will be expected to meet their Lease obligations.” Taubman’s hardline is a classic “cut off your nose to spite your face” move, since rent is among retailers’ largest fixed expenses. If landlords continue to demand rent when no sales are coming in, it will push retail tenants closer to their breaking point.

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And there remains another wildcard: many malls may not be able to open at the end of April depending upon local conditions. Since the coronavirus threat appears to be greater in high population areas – just the kind of places where malls are located – malls may face extended closings in local communities. The writing was on the wall Admittedly, nobody saw this pandemic coming, but they should have read the symptoms of sickness in mall‐based retail regardless. Instead, they focused on the dynamic topline retail growth, which enjoyed a 4.2% CAGR from 2010 to 2019, rising from $3.1 trillion to last year’s $4.5 trillion in retail and food services sales, excluding autos, car parts, and gasoline stations. However, two retail sectors that malls are heavily dependent upon – clothing and department stores – have underperformed over the past nine years. Clothing stores only saw 2.6% CAGR, while department stores have declined by 4.6% as measured in compound annual growth over the last nine years. Trends like these led Credit Suisse back in 2017 to predict that 25% of the nation’s malls, or some 275, would be closed by 2022. About the same time, Green Street Advisors predicted that 300 malls, classed in the bottom C and D category were on the edge. Those at‐risk malls were pushed further to that edge by 8,000 major retailer store closures in 2017, nearly 5,500 more in 2018, followed by 9,200 in 2019. As of mid‐March Coresight Research expects 15,000 stores to close permanently in 2020, but it could go even higher depending on the duration of the coronavirus. In the interim, malls expanded their experiential offerings, adding restaurants, movie theaters, and other things to do to their mix. But that is not going to help them now since they were the first casualties of social‐distancing public health protocols, and likely will the last coming out of them as well. Malls to become do‐not‐enter zones afterward Social distancing has become the new normal for the American way of life and given people’s rising awareness of the threat to gathering in indoor spaces with crowds of people, it is likely that indoor malls are going to be the last place people will want to shop post‐coronavirus. A Coresight survey conducted March 17‐18 among some 1,200 consumers found that malls are at the top of the list of places to avoid if the outbreak worsens – which it surely will – with movie theaters and restaurants not far behind. While we should be cautious about assuming what people say they are going to do in surveys is what they actually will do, I think we should believe them. Malls are artificial environments organized for the express purpose of separating consumers from their money. As such, they are unsustainable in their present form in the shopping environment that is taking shape now. Consumers have shifted spending toward necessities and away from discretionary purchases that malls depend upon. It is going to take some time before consumers get over the shock to the system that coronavirus has meant and are ready, both emotionally and financially, to indulge again in discretionary spending. For a whole host of reasons, I believe shoppers are going to avoid malls “like the plague” once the immediate COVID‐19 threat subsides. And public health officials warn it may re‐emerge with a vengeance come fall unless a vaccine is found or enough of the population develops immunity naturally through exposure to the virus, what is called “herd immunity.” If this eventuality occurs, retailers’ Christmas 2020 is shot, along with the first four‐to‐six months of the year.

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