By Chris Hoffman
(Madison, NY – May 2012) Last month, at a Town of Madison Planning Board meeting, Sphere Development came before the Board to request approval of a subdivision of the land it owns where Madison Market Place is located. Sphere wants to subdivide the existing large parcel and create several smaller parcels.
I asked why Sphere wanted to do this. The response was that Sphere wants to refinance and the bank was requesting the subdivision in order to consider the refinance application. When I asked why the bank was making such a request, the answer from the Sphere representative was, “I don’t know.”
Curious, I later decided to see if I could find an answer. I called a commercial mortgage officer at a local bank and asked a generic question: Why does a bank require an existing mortgagee to subdivide a commercial property in order to consider refinancing the mortgage?
He told me that the most likely scenario is that the property is not bringing in enough rental income from commercial tenants. The developer is counting on rental income to pay the mortgage. Without sufficient rental income to meet that obligation, the risk of default is too high for the bank’s comfort, so the bank requests the mortgagee to sell off some of the vacant property and use that income to pay down the mortgage principal. The bank will then consider refinancing the remaining principal.
Why am I not surprised?
Remember when Sphere originally approached the Town of Madison about building this shopping center? First, they wanted the Village of Hamilton to provide water, electric, and sewer services. The Village, rightly, said they’d be happy to do so if the Town of Madison would annex the land into the Village. Madison refused, and Sphere Development refused as well, as they did not want to have to pay Village taxes in order to benefit from Village services.
Sphere also promised a number of things they were never able to deliver: new restaurants (an Olive Garden was mentioned), possibly a Sears or a J.C. Penney store, as well as other retailers that were unnamed at the time. Their outdated website still states: “Other familiar names are currently being added to the tenant roster, which will include apparel stores, quick casual restaurants, and service providers.”
The two anchor stores, Price Chopper and Tractor Supply, went up with no problems, and I’m happy to have them there. But it took more than two years for the only additional stores to date to open, Peebles and a Family Dollar store. As if we needed another dollar store! Sphere’s site plan for Madison Marketplace can be found here: http://www.spheredevelopment.com/madison.html. Interestingly, it also lists NBT Bank as a tenant, but in fact there’s nothing there but an ATM machine.
Sphere also petitioned Madison County IDA for tax relief, but, if memory serves, I believe that petition was denied.
In the meantime, complaints are beginning to surface regarding lights from the shopping center and mounds of industrial debris that was supposed to have been cleaned up once construction was finished, but never has been.
What is the lesson here?
Developers are very good at promising the moon, and very bad at keeping those promises.
Chain retailers, even regional ones, base their locations on one thing: market demographics that drive profit. Without sufficient population to guarantee steady sales, most aren’t interested in incurring the expense associated with establishing a new store if the numbers don’t show the potential.
It seems to me that Sphere either didn’t do their homework properly or they didn’t care what the outcome was, as long as they got their shopping center built, within a township with lax land use laws and outside of a village so as to avoid an extra layer of taxes.
Instead of townships allowing this kind of development, would it not make more sense to encourage the development and expansion of local businesses that already have an established client base?
Is this not an excellent example of why commercial development should be planned and designed with the input of existing local businesses and residents, based on what works locally, and what people want locally?
Now we have a shopping center that is nothing like it was envisioned to be, that is currently about 75 percent vacant, years after groundbreaking, with no new tenants in sight. And we have a developer apparently scrambling to get out from under a mortgage debt that is no longer tenable.
Not the way to go. But I could have told you that from the outset.
Chris Hoffman lives in the village of Sherburne in her 150+ year-old house where she caters to the demands of her four cats, attempts to grow heirloom tomatoes and herbs and reads voraciously. She passionately pursues various avenues with like-minded friends to preserve and protect a sustainable rural lifestyle for everyone in Central New York.