Developer says rate hikes could slow work at former Tri-County Mall

The exterior of Tri-County Mall is seen March 9, 2022. NICK GRAHAM / STAFF

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The exterior of Tri-County Mall is seen March 9, 2022. NICK GRAHAM / STAFF

Hikes may spark a recession, which would make entertainment venues less viable.

SPRINGDALE — Springdale’s Artisan Village project is looking at esports, pickleball and tournament-style golf simulators to replace all that empty retail space in the former Tri-County Mall.

But it looks like Mi Cozumel will stay.

“This is a great opportunity for us to bring even more fun to the community,” said Diana Jaime, director of marketing for the family-owned business that operates three Mi Cozumel restaurants and is building a fourth in Lebanon. “This is our first location since the beginning. So, this is very important for us not to remove it.”

The Mexican restaurant, known for two-hour wait times and over 40 different kinds of margaritas, is talking to developers about staying open throughout the mall’s redevelopment.

“We’re evaluating what our options are for Mi Cozumel and BJ’s Brewhouse as we speak,” said Michael VanHuss, managing partner of Dallas-based Park Harbor Capital LLC. “Probably in the next 30 days, we’ll know what we’re going to be able to do.”

The Springdale Planning Commission this week approved the first-phase site plan for the $1.1 billion project, enabling demolition to begin by this fall. With that milestone behind him, VanHuss agreed to update the WCPO 9 I-Team on various elements of the project, including some new entertainment uses under review, plans for a new architectural team and the impact of the Federal Reserve’s June 15 rate hike on the project.

The first-phase site plan includes 450 apartments, a recreation and fitness center in the old Dillard’s department store space and 40,000 square feet of retail and restaurants.

Mi Cozumel and BJ’s Brewhouse operate on utilities from the mall’s main trunk line. So, VanHuss is looking for ways to keep sewer, water, gas and electric flowing while the mall is converted to apartments and entertainment uses. If that isn’t possible, the restaurants might have to close for 18 months until they can be invited back in 2024, he said.

Jaime said developers have also talked about relocating her restaurant to a mall outparcel, which could let her family expand and improve the space. While she would prefer to stay open through construction, she would also return to the project if Mi Cozumel is forced to temporarily close.

“We are already thinking of a lot of crazy ideas like a rooftop, a private party room, a much bigger bar,” she said. “I think the whole mix that they are thinking about, for me is very exciting, new and ecological as well, what we need right now.”

Park Harbor partnered with MarketSpace Capital LLC of Houston in November to announce the mall’s purchase. The fast-moving project secured a development agreement with Springdale in December and a tax-increment financing authorization in April. It renamed the property Artisan Village in May and has been courting entertainment venues for weeks.

“We were approached by a national pickleball venue and we loved their concept,” VanHuss said. “We think there’s definitely room for that in our development.”

VanHuss attended the International Council of Shopping Centers Convention in Las Vegas last month. He said his team met with operators of esports venues, movie theaters, golf simulators and axe-throwing concepts who might join the concert venues, dog park and hiking trails already planned for Artisan Village. No deals are signed, he said, but many are under consideration.

“We just want to create an environment where people come and enjoy themselves, whether it’s a day trip or whether they decide to move and live there, or whether they just come to work there,” he said.

Over the next 10 years, Artisan Village aims to replace the 1.3 million-square-foot mall with roughly 4 million square feet of apartments, hotels, office space and educational uses. VanHuss said the project has letters of intent to fill about 25% of that space, starting with 11 buildings in phase one.

He said the project is close to naming a lead architect, replacing BHDP, which guided Artisan Village through the development of its site plan. From this point forward, Artisan Village will be organized as a series of smaller projects that replace acres of parking lots with new buildings.

“We could have 15 different architects that work on our project,” VanHuss said. “We do have one design team that we’re working with who will facilitate the co-working of all those different architectural firms, but we’re probably not going to go with just one architectural firm.”

The project’s financing will also happen in clusters, VanHuss said. Although Artisan Village received a $200 million tax-increment financing pledge from the city of Springdale, VanHuss expects developers to cover the cost of demolition, design and infrastructure until new buildings are ready for construction.

“What everybody needs to think about is we’ve got several small projects inside of one really big project,” he said. “Each of those small projects will have their own capital stack, they’ll have their own financing and debt structures. So, we’ll probably start financing later this year as we deliver the individual building designs and that’s when we’ll be able to start working with lenders to finance that element.”

While the clustering of projects could make Artisan Village easier to manage, inflation and rising interest rates could make it impossible to control. VanHuss said the Federal Reserve’s 0.75% increase to its benchmark interest rate will not prevent the project from moving forward this year, but the Fed has also talked about future rate hikes to cool the U.S. economy and wipe out inflation. Those moves could spark a recession, which would make entertainment venues less viable.

“It depends on what those rates ultimately do,” VanHuss said. “If we return to 1979 and 1980 where you had 18% debt, yeah, its gonna impact our property and our project. We don’t foresee that but it’s impossible to project what’s taking place in the country.”

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