Just over two years ago, the City of Missoula formally declared Southgate Mall a blight. And on Feb. 22, the Missoulian reported that an Ohio investment company is purchasing it for $58 million.

The city’s declaration was a legal step taken to enable the mall’s then-owners, Southgate Mall Associates, to apply for millions in tax-increment financing, a type of tax break, to support an ambitious renovation. The Missoula Redevelopment Agency ultimately awarded the project nearly $7 million in TIF financing. Little did MRA director Ellen Buchanan know that the project, leveraged with public support, would be used to help sell the mall before the paint on renovations is even dry. A new dine-in theater opened at Southgate two weeks ago, and a Lucky’s Market grocery store will open later this year.

But Buchanan isn’t concerned that the city helped flip a mall. She’s excited. “I think it’s a win-win,” she says.

When the sale was announced, Peter Lambros, of Lambros ERA Real Estate and a representative for Southgate Mall Associates, told the Missoulian he expected the new owners, Washington Prime Group, to take the mall “to the next level.” The sale of the mall will allow Lambros, in turn, to focus on developing mixed-use housing in the surrounding area.

The sale does not affect any of the tax support the city approved in late 2015, Buchanan says, and the use of TIF money was not conditioned on any particular use of the mall property.

“People sell property all the time that have taken advantage of tax increment,” she says, referencing the Wilma building as an example.

Buchanan clarifies that the TIF financing awarded to Southgate was not used to renovate the facility. Rather, the money was requested to construct the public street that now extends Mary Avenue to Reserve Street. The infrastructure upgrade had been listed in city planning documents for years, but only with the renovation were the mall’s owners willing to grant a public right-of-way through the site. Even if the new owners were to abandon all development at the mall, Buchanan says, the TIF investment would still be money well spent.

“Southgate Mall Associates did not reap any benefit,” she says. “If they view having a city street as being beneficial to them, then that’s their benefit. … It ties the neighborhood together.”

At the time, however, the developers said MRA’s support was “critical” to their ambitions. Their 53-page TIF financing application stated, “achieving this vision is not possible without public investment.” The developers went on to write that the $71 million proposed project required them to assume “substantial risk,” and the return on investment was “long-term."

Staff Reporter

Staff reporter Derek Brouwer joined the Indy in 2015 after year-long stints covering education at the Billings Gazette and the Helena Independent Record. He graduated from Montana State University. Follow him on Twitter: @derekwbrouwer.

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