East Brainerd Mall: A new look

The East Brainerd Mall redevelopment project proposed by Oppidan would cost the development company $12,125,000. Here is a breakdown of the costs.

-- $2,500,000 for property acquisition.

-- $700,000 in demolition/asbestos abatement.

-- $1,475,000 in soil correction and site work.

-- $5,050,000 for new construction.

-- $210,000 for rehabilitation of existing space.

-- $200,000 for lighting and signs.

-- $175,000 in new tenant improvement allowance.

-- $1,815,000 in financing, fees and buyouts.

BYLINE1:By MATT ERICKSON

BYLINE2:Staff Writer

Pending a final decision by the Brainerd City Council, the East Brainerd Mall could have a whole new look next spring.

Oppidan Inc., a merchant development company based in Minnetonka, has entered into a purchase agreement to buy the mall and, pending a public hearing and final city council approval of Oppidan's tax-increment financing request, will proceed with a $12,125,000 redevelopment project.

Oppidan is the second developer to take interest in buying and renovating the mall within the past year. The other developer, United Properties, had a purchase agreement with the owners of the East Brainerd Mall but was unable to get a deal done before the time limit on the agreement ran out.

Oppidan has a purchase agreement with the current owners, said Oppidan representative Paul Tucci, and it is hoped construction on the mall would begin this summer.

One obstacle in the way of a redeveloped East Brainerd Mall is tax-increment financing. Tucci has said it is needed for the redevelopment to occur, but Bob Olson, a Brainerd City Council and Economic Development Authority member, has voiced concerns over granting TIF assistance, calling it "corporate welfare."

"We have to use TIF with discretion," Olson said. "We can't be greasing the palms of every developer."

Olson also doesn't feel the end outweighs the means of TIF, as people in their 70s and 80s won't see the benefit of the increased property taxes after the 15-year TIF district is done.

TIF allows a city to use the additional property taxes generated by a new development or a redevelopment project, such as the proposed East Brainerd Mall project, to pay for certain development expenses.

With TIF, a city secures the additional property taxes, or increment, generated by the redevelopment. The increment is then returned to the developer for a period of time to finance the development costs.

The Brainerd School District has also expressed potential interest in the site, and Olson said consideration should be given to the school district. If the school district purchased the mall, it would become tax exempt.

If Oppidan's TIF request is ultimately approved, after 15 years, the city, county and school district will be sharing an estimated $426,900 in future property taxes from the site. Currently, the East Brainerd Mall generates $80,000 per year in property taxes.

Taxes are divided 41 percent to the school district, 32 percent to the city and 26 percent to the county. One percent goes toward other taxing jurisdictions, like the Brainerd Housing Redevelopment Authority and Region 5.

With the exception of J.C. Penney, Oppidan's plans call for much of the mall to be demolished to make room for a new 64,670-square foot Cub Foods, 18,520-square feet of retail space between Cub Foods and J.C. Penney, as well as two buildings for retail space on the south side of the mall parking lot -- one 12,480-square feet and the other 8,940-square feet.

Another feature of Oppidan's plans is the transformation of the East Brainerd Mall to a strip mall.

"Our experience has shown small, indoor malls don't work," said Paul Tucci, of Oppidan.

Oppidan also found a combination of structural problems with the mall, hazardous materials in the mall and sub-soil problems on the property made reconfiguring and developing the existing mall buildings financially impossible.

Oppidan has been working with the Brainerd School District to build space for the Early Childhood Family Education Center behind the mall, with an access point in the front of the building.

What will become of the current tenants in the East Brainerd Mall is unknown. J.C. Penney, with a lease for another two years plus an option for another five years, will remain as an anchor at the mall. Mike Sweeney, manager of J.C. Penney, said he is unsure what J.C. Penney's home office will do when the lease expires, but he hopes something is put together because he feels the trend in malls is toward strip malls.

Other businesses have been signing a lease month-to-month, and no space has been guaranteed for current businesses.

"We're talking to the tenants, but we're not sure who will be relocated where," Tucci said.

Olson feels since the city is offering TIF assistance, Oppidan should work to keep the current tenants.

"When the city is contributing that amount of tax money, a little more consideration should be given to the tenants," Olson said.

Montgomery Ward had been an anchor store in the East Brainerd Mall from 1967 until it closed Jan. 15, 1999.

Formerly called the Brainerd Mall, it was the only mall in the city when construction started in 1966. Built by Joe and Kay Gustafson, the mall has been owned by his three daughters, Lisa Lake, Joni Alvarez and Greta Graff. Alvarez and Lake operate Gigi's Hallmark shop in the mall.