Letter to the Editor: Redevelopment of the Miracle City Mall

Redevelopment of the Miracle City Mall Property

A Commentary by Richard J Greco, Titusville Resident

Editor's Note:  NBEDZ Chairman and Parrish Hospital CEO George Mikitarian was given the opportunity to address the issues raised by Mr. Greco.  He declined.  Brevard County Commissioner Robin Fisher responded to these issues at the last Commission meeting which can be viewed here.

The redevelopment of the Miracle City Mall property is pivotal to the rebirth of the City of Titusville. It deserves careful consideration and thought. Suffice to say, no one wants the property to remain in its present condition. In the rush to do something, the City may fall into an ill-conceived plan and poor execution. Political muscle may conquer the careful consideration of alternatives. Short range thinking could overwhelm long range thinking. Myopia could rule over insight. It is the purpose of this writing, to capture the essential issues for all voters and politicians who have a stake in this. Ultimately, whatever is decided, will stand as a testament to wisdom or folly.

This article addresses: (1) why we are redeveloping the MCM property,(2) who has applied for the $ 6.5 million grant, (3) what is the plan, (4)what are the alternatives and (5) how did we get here with this issue.

1. Why are we redeveloping the Miracle City Mall site?
It appears that the short term reasons are:
  1.   The site is a public health and safety hazard;
  2.   The site is a blighted part of the City;
  3.   There is a need for more shopping;
  4.   There is a need for more jobs.

1.1 The site is a public health and safety hazard.

If this is the case, what actions have already been taken by the City of Titusville Code Enforcement Department to cite violations to the property Owner? If none, why?

1.2 The site is a blighted part of the City.

Unquestionably, it is an ugly reminder of the City of Titusville’s failed past. People are just tired of looking at it. Again, what has the City done to compel the property Owner to maintain the property?

1.3 There is a need for more shopping.

Although a market feasibility study was not required by the North Brevard Economic Development Zone (NBEDZ) for a Grant Application, nevertheless, the NEBDZ did a report, dated 08/12/2013, on “The Potential Impact of Redeveloping the Miracle City Mall Property”. What does the report say about the current status of the retail market in Titusville?

There are 3 major shopping areas of interest to the Miracle City Mall (MCM) property. Crossroads is located near I-95, SearsTown Mall is located on US1, and Indian River Plaza is located on Rt. 50. From Page 18 of the NBEDZ Impact Report, we can discern the following:

Major Shopping Area    Total Retail Space(SF)Vacancy Rate    Vacant Retail Space(SF)
Crossroads                             200,000                         10%        20,000
SearsTown Mall                        85,000                         20%        17,000
Indian River Plaza                    150,000                         35%        52,500
Sub-Total                                 435,000                        20%        89,500
Add: MCM proposed              253,000
Total                                         688,000

The retail component of the MCM proposal is approximately 253,000 SF. The market impact of the addition of 253,000 SF is illustrated in Graphs #1 - #3, which are attached. The MCM proposal of 253,000 SF of retail use, is more than the size of SearsTown Mall and Indian River Shopping Plaza, combined.

Currently, the 3 shopping areas have almost 90,000 SF of vacant space. The addition of another 253,000 SF evokes the question about absorption rate. How long will the project take to absorb 253,000 SF of retail? If all the space is brought to market too soon, it will have a dilution effect, and jobs in the area may be cannibalized. If the time to absorb the space takes too long, the project becomes uneconomical, and the area will look unfinished for many years. Either scenario has its downside. An argument can be made that additional space will stimulate demand, and as the expression goes, “all boats rise with the tide.” However, given current economic conditions, and the difficulty of the developer to obtain anchor tenants, it is a high risk market. A key benchmark will be the initial tenant leases the Developer obtains before starting construction.

It should be recognized, that the preferred location for anchor stores is near a major transportation artery, such as I-95. This is true in Titusville. Crossroads, for example, is 90% occupied. Big Box stores, such as WalMart, Home Depot, Loews, and Target, have located close to I-95 in Titusville. Future Big Box stores will locate where the other Big Box stores already are located. The US1 corridor from Palm Bay to New Smyrna Beach empirically shows that the US1 corridor is not the preferred location of anchor stores.

The grocery store component was dropped from the project concept since the publication of the NBEDZ Impact Report. It is expected that if allowed to continue, other changes will be made in the concept to adapt to market conditions.

The contention that retail is the highest and best use of the MCM property is open to question. Indeed, the NBEDZ’s Impact Report never laid a foundation for this premise. A mixed use development, comprising residential, commercial and retail components, spreads the risk, promotes faster absorption, and produces higher wage jobs than exclusively retail. The mixed use concept had been endorsed by every previous developer who considered redeveloping the site. An urban village concept is also consistent with every consulting report submitted to the City. The Comprehensive Plan, Land Development Regulations and US1 Corridor Plan, all promote a mixed use, urban village concept. Indeed, the City invested almost $200,000 to develop its Urban Design Manual.

It is suggested that retail, as a component of a mixed use component, should not exceed approximately 125,000 SF. It is also suggested that a high concentration of retail, as indicated in the current site plan, should be reconsidered in favor of residential and more commercial space. The balanced retail component would satisfy the need for more diversity of retail, while not oversupplying the general retail market. The residential component would promote more people living close to US1. The greater the population in the area, the greater demand is created for services and products.

1.4 There is a need for more jobs.

Absolutely, Titusville has a need for more jobs! Let’s review the projection of jobs created by this project, starting with the data provided on Page 18 of the NBEDZ Impact Report.

The Medical Building component shows 220 jobs. This comprises 140 professional/support staff and 80 professionals. The total annual payroll amounts to $12.4 million, or an average per job of $56,360. In a County Commission meeting, November 19, Commissioner Fisher mentioned these were consolidations. This prompted a Public Records Request to George Mikitarian, CEO of Parrish Medical, to reveal whether the projected 220 jobs came from Parrish Medical, and whether the jobs were consolidations of existing jobs. Although George Mikitarian has not yet responded to the Public Records Request, clearly, the developer cannot count these jobs as net new jobs. They originate from our own County Hospital, up the street. Therefore, they are deducted from the Total 756 jobs to be created, as noted in the developer’s Grant Application.

That would mean that the balance of 536 jobs, are from the Retail component. The NBEDZ Report indicates that the 536 jobs are categorized as follows:

    Full Time, Non-Managerial Jobs        166
    Full Time, Managerial Jobs                  50
    Part Time, Non-Managerial Jobs        320
                Total                                      536

One part time job is not the same as one full time job. So, in order to have a clear understanding of full time jobs, the part time jobs have to be converted to full time equivalent jobs. A full time non-managerial job generates $30,000 annual income, while a similar part time job generates only $10,000. Therefore, a 3 to 1 ratio would convert part time jobs to full time equivalent jobs. So, 320 part time jobs would amount to 107 full time equivalent jobs.

Now, let’s look at the Retail component, as summarized below:

                    Retail Component Full Time Jobs

Description    Full Time Jobs    Full Time Jobs     Full Time Equivalent   TOTAL
                    Non-Managerial    Managerial          Non-Managerial        JOBS

Annual Wage     $ 30,000           $ 45,000                $ 30,000

Annual Payroll $ 4.98 million        $ 2.25 million        $ 3.2 million       

# Jobs             166                          50                        107                     323

Of course, the projection of 323 full time jobs would be at maturity of the project, at steady state, and full occupancy. The Total Annual Payroll can be calculated to be $ 10.43 million. The average full time wage would calculate to be $ 32,291 per job. A monthly projection of jobs has not been available. However, the Developer has stated in the Grant Application, the project will reach full time employment in 3 years, i.e. June 2017 (see Page 8, Grant Application).

So, if Job Creation is a top priority, and indeed it is, the question arises concerning the types of jobs expected to be created. Commercial Space, it is opined, will produce average wage jobs which are higher than Retail Space. Look at the difference in average payroll, $56,360 from Parrish Medical, to $32,291 for a retail job. Then, why not allocate more Commercial use to the site plan, reduce the concentration of Retail use, and allow for higher wage opportunities?

Further, the Developer, on Page 7 of the Grant Application, states that typical benefits from the jobs to be created “would include health insurance, vacation pay, sick leave, 401K, among other benefits.” Really? How many restaurants, movie theaters, and retail establishments that you are aware, give those types of benefits? And recall, there are 320 part time jobs in this mix, which have been converted to full time equivalent jobs for comparison sake. Part time jobs usually have no benefits.

Let’s summarize the jobs issue. The Grant Application shows that the result of this shopping center being built will be 756 jobs. This is not correct. Take out the 220 jobs attributed from Parrish Medical, our County Hospital, because the Developer is really not generating those jobs. Convert the remaining number of jobs to full time and full time equivalent jobs, and the total jobs amounts to 323 retail jobs paying an average of $ 32, 291 per year per job, and that is at full capacity. The Grant Application is an exaggeration of numbers. There are not 756 net new jobs to be created, as the Developer put in the Grant Application. The real number is 323, and that is if you believe the rest of the assumptions.

Let’s look at it this way. In order to generate 323 retail jobs, it will cost $ 6.5 million of Grant money. That is a cost per job of $ 20,123.

And, we have not yet introduced the Law of Unintended Consequences. All of the prior discussion has assumed that there will be no negative effects on existing shopping areas. For example, what do you suppose the negative effect might be to the SearsTown Mall? The Owner of the SearsTown Mall has recently invested $ 300,000 of his own money to renovate the movie theater. Will he lose his investment because the government gave $ 6.5 million to a company from Columbus, Ohio with plans to build a 42,000 SF movie theater, 1 mile away? Potential devastation of existing businesses is something to consider. So, how much will the potential loss of jobs in existing businesses affect the net new jobs expected from the redevelopment of the Miracle City Mall property?

2. Who is the Developer?

The developer identified in the Interlocal Agreement and Grant Application, is Exxcel Project Management, L.L.C. It is headquartered in Columbus, Ohio. It is an industrial construction company specializing in warehouses. It has never owned, marketed or managed a shopping center. It has not had a market feasibility study done by a reputable market research firm. It is purchasing the Miracle City Mall site, without an appraisal. The County Property Appraiser’s office values the land at $1.6 million. Exxcel is buying the property for $6.3 million. That is 4 times the value! Do you know anyone who buys something for 4 times the estimated value? The North Brevard Economic Development Zone did not require a market study, nor an appraisal. Based on these facts, would you consider Exxcel an experienced successful shopping center developer? Would you want to have a company which never did this before now, to experiment with the most strategic piece of land in the City of Titusville?

2.1 Why does the Developer need a Grant of $ 6.5 million?

The answer is in the Grant Application, Page 9, as quoted below:

“Project is not feasible without the incentive from N. Brevard given the state of the area as well as the retail industry as a whole.”

Would you give $ 6.5 million of free money to someone who gave you that rationale?

Certainly, NBEDZ must have required some economic analysis to show that there was a $ 6.5 million deficiency in the project.  If not, why? There is no explanation in the Grant Application why the amount needed is $ 6.5 million. But of course, the financial information is confidential. The only explanation is how the Grant will be used, i.e., to fund demolition and infrastructure, which is estimated by the developer to be $ 6.5 million. Did NBEDZ hire a firm to verify the estimates of the Developer? If not, why? Could it be that by paying $ 4.7 million more for the land than it is worth, Exxcel needs more money to finish the project? Is there more to this story than meets the eye? Can you understand this deal?

2.2 How does the Developer get the Grant money and when?

Initially, the Developer was to be reimbursed in progress payments while it was doing demolition and infrastructure. However, the Developer, in its Application for Developer’s Agreement with the City of Titusville, changed the payment procedure. Instead, it will request the full amount after obtaining a certificate of occupancy on the first 3 buildings, i.e. the movie theater, the first building for Parrish Medical, and an anchor store. Having not yet seen a Developer’s Agreement, there is no comment yet on such things as performance bonds, recapture of Grant money in the event of other default conditions, etc.

So, let’s follow the money. NBEDZ doesn’t have any money yet, but when the new FP&L plant is operational, it will receive approximately $ 3 million a year from a portion of the taxes FP&L pays to the County. Since NBEDZ doesn’t have any money yet to fund the Grant, the City of Titusville will borrow $ 6.5 million, and be reimbursed when NBEDZ gets its money from the County. It gets very complicated after that, particularly in default circumstances.

3. What is the plan proposed by Exxcel?

Other than the 2 buildings for Parrish Medical, the rest of the property is dedicated to retail use. The site plan is unimaginative. The old Miracle City Mall was basically a big box surrounded by asphalt parking. The Developer’s site plan comprises smaller boxes surrounded by asphalt parking. The focal point of the site plan is the movie theater. The current site plan is attached as Exhibit #1.

The site plan will face several obstacles, not the least of which will be drainage and storm water runoff issues. The site is very close to the Indian River Lagoon, which is experiencing severe environmental problems. The site plan has many inconsistencies with the Comprehensive Plan, Land Development Regulations and the US1 Corridor Master Plan. It will be interesting to watch how these inconsistencies get resolved.

One of the most disturbing things about the site plan is the lack of a Town Square. Throughout the past year, the Developer’s agent Allen Goins, has promoted the Town Square as his “Crown Jewel”. Site plans posted on the website of The Greater Titusville Renaissance showed a gradual reduction in size of the Town Square. It is nonexistent on the current proposed site plan. If the City does proceed with this Developer, it should insist that the site plan include a combination Civic Amphitheater and Town Square. Isn’t that the least the voters would expect from giving the Developer a free gift of $ 6.5 million?

4. What are the alternatives?

The most logical alternative is a mixed use plan which includes a residential component, a commercial component and a retail component. This concept is consistent with the Comprehensive Plan, Land Development Regulations and US1 Corridor Master Plan, and the Urban Design Manual. The benefits of this approach include:
    1. increase the population near US1, to create more demand in the area for goods and services;
    2. provide a stable, balanced tax base for the City;
    3. complement the architectural and historical heritage of the City;
    4. create a focal point for the City’s activities;
    5. promote new image with current site planning technology;
    6. facilitate attractions for tourists;
    7. complement existing retail and commercial rather than cannibalizing it.

The buildings for Parrish Medical need not be free standing buildings, but can be incorporated above retail or commercial activity. Parking garages could be utilized to create more open space, and provide for better storm water management. A real town square could be accommodated with a civic amphitheater, as a focal point of community events, and as a congregating area.

Ideas such as these have been articulated by successful developers who have studied the MCM property. One such proposal done by Sunrise Properties in 2007 is an example of creativity and imagination in land use. A study done by University of South Florida’s Center for Community Design and Research, for Downtown Titusville’s Community Redevelopment area, expresses similar ideas.

What a shame it is to ignore all this research, to ignore all these great ideas, which have been put together for and by the City of Titusville. In a rush to do something, with a feeling of Titusville can’t do better, Titusville may be on the verge of settling for an unimaginative site plan, with an inexperienced shopping center owner/developer. The opportunity cost is incredible. Indeed, our politicians such as Robin Fisher, have tremendous energy and political force, but they are pushing Titusville down the wrong direction.

The myopia is that Titusville is a riverfront City, and unfortunately, does not capitalize on its greatest asset, the riverfront. Imagine water taxis bringing people from the Port to the new Titusville Town Square! It could be a boon for tourism in Titusville. Today, an average of 300,000 people each month go through the Port. Buses take many to Cocoa Village. Why would they go to Cocoa Village? Could it be for its charm, quaint shops and boutiques, restaurants? There are no anchor stores in Cocoa Village. For that matter, there are no anchor stores on Park Avenue in Winter Park, nor in downtown Mount Dora, nor in downtown Naples, and the list could go on. Why do tourists visit these downtown areas? Why do locals like to congregate there? Why can’t Titusville do this?

5.  How did we get here with this issue?

In 2011, while Robin Fisher was Chairman of the County Commissioners, the North Brevard Economic Development Zone (NEBDZ) was established as a dependent special district with tax incremental financing. The goal was noble. Provide a vehicle to support economic growth in Titusville and District 1.

A Board comprising 9 volunteers from the community was formed, an Executive Director was hired, and the charge was to do something quickly. Robin Fisher led the charge, trying to find a developer for the redevelopment of the Miracle City Mall. He became cofounder of The Greater Titusville Renaissance which increased the visibility of his efforts.

But, the distance between the lofty goals and actual processes and procedures began to widen. The makeup of the NBEDZ Board mostly comprised business partners or friends of Robin Fisher. Expediency ruled. This is evidenced by the selection of the developer, chosen by Fisher; the lack of minimum construction industry contract standards; the exaggerated numbers in NBEDZ Impact report; the obvious lack of detail, and thoroughness in the Grant Application document; the unimaginative site plan; the rejection of input from the City’s Planning & Development Staff, and previous research and proposals; the lack of input from business owners; and, the lack of sensitivity to business owners who would be adversely affected by NBEDZ plans. Finally, it was the arrogance to run roughshod over any disagreement, to block citizens’ public records requests, or to consider any other alternative than its own, and push full speed ahead, with the political approvals to “make it happen.”

This is how we got here. This is why this document was written. It serves as the last call for reasonableness. It is the last expression of hope that those in positions of public trust will reconsider their actions before it is too late. Would it be a breach of trust for our officials to act without the same prudence that a reasonable person would exercise in the same circumstances?

If the redevelopment of the MCM property fails, then what? Do another one? And that is precisely the point. Just as in Apollo 13, failure was not an option, the same is true here. Failure to consider the downside of any deal, any endeavor, will insure failure; so will lack of consideration of other alternatives. Titusville can ill afford a failure. It needs a big success. Can this project succeed with a developer from Columbus, Ohio who never owned and operated a shopping center? Can this project succeed with an unimaginative site plan? Can this project succeed, when the feasibility numbers are pumped and unrealistic? Do you think it would be reasonable to expect due diligence before granting $ 6.5 million?

The closing of this article will be a quote from Jim Tulley, Mayor of Titusville, who is a man of integrity. He posted this on March 19, 2012, on a blog of the Greater Titusville Renaissance. He wrote this after attending seminars on “Balancing Nature and Commerce.”

“If there was one common theme that was apparent in most of the presentations, it  was that for Titusville to prosper, we must lose our unique character. So while we all want to see new stores, restaurants, and businesses. We must build these enterprises in a way that makes Titusville unique along the east coast Florida. We have so much to offer here, but it is only by providing an unusual and unique experience for our visitors, will we be able to attract new and return guests. This us a time for all of us to step up and make Titusville the kind of city of which we can all be proud.”

Let’s step up. Don’t accept mediocrity. Don’t accept good enough. Expect the best. Tell our political leaders to stop the train! Reject what NBEDZ is proposing for the redevelopment of the Miracle City Mall! Get back to the drawing boards! Give us a quality proposal and a project that will serve us now, and future generations with great success!

Thank you. If you agree with this commentary, tell your representatives. If you don’t, tell me why.

Richard Greco    

Titusville City Council                Brevard County Commission
[email protected]             Robin Fisher       [email protected]
[email protected]       Chuck Nelson     [email protected]
[email protected]       Trudie Infantini     [email protected]
[email protected]       Mary.BolinLewis [email protected]

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