MASON CITY | The Southbridge Mall owner has paid his delinquent taxes.
Cerro Gordo County Treasurer Patricia Wright said in a news release Thursday morning Southbridge Mall Realty Holding, LLC, owned by Michael Kohan of Kohan Retail Investment Group in Great Neck, New York, paid $150,254 in real estate taxes and interest for the mall in downtown Mason City.
“The payment was received by the agreed upon deadline and processed on Dec. 6, 2018,” the news release said.
The payment was due by Wednesday.
Kohan’s payment includes the fees and damages due on three of four checks that bounced on Oct. 3 due to non-sufficient funds.
In October, delinquent real estate taxes and interest for Southbridge Mall totaled $177,324.
Wright said current real estate taxes for fiscal year 2017-2018 payable fiscal year 2018-2019 are unpaid. In the event they remain unpaid, the parcels will be listed on the annual tax sale in June.
The mall's real estate taxes are important to the $39 million downtown River City Renaissance Project, which includes a multipurpose arena at the mall and a hotel.
During a special council meeting in late November, City Administrator Aaron Burnett said if Southbridge Mall goes to tax sale, “several groups expressed interest in ownership of the mall,” so he doesn’t envision any “significant change” in the project if Kohan doesn’t pay the remaining taxes.
“Now obviously, if there was a change before everything was locked in then that would … create an issue if the new mall owner was not supportive of the project,” he said Nov. 27.
The treasurer's office sued the LLC and Kohan for the delinquent taxes in September.
Prior to the lawsuit being filed in September, Wright said her office worked diligently to collect the real estate taxes on the mall.
The lawsuit was dropped in October after the county received checks from Southbridge Mall Realty Holding.
The civil suit was dismissed without prejudice, meaning it can be brought back to court.
Kohan bought Southbridge Mall for $1.5 million in September 2016.
On Nov. 27, the Mason City Council decided to move forward with the downtown project despite uncertainty over the payment of the mall’s real estate taxes.
The City Council approved a pre-development agreement with Gatehouse Mason City LLC in a 5-1 vote, with Councilman Joshua Masson opposed. It also unanimously approved an architectural contract with ICON Architectural Group of Grand Forks, North Dakota, for a multipurpose arena at Southbridge Mall.
A letter from Gatehouse to the city states the project will have a 100-room “select-service hotel,” such as Courtyard, Hilton Garden Inn or Hyatt Place. The Music Man Square would be expanded to include a 6,000-square foot ballroom and 1,500-square-foot banquet kitchen.
As for the multipurpose arena, City Administrator Aaron Burnett noted in a memo the Mason City Youth Hockey Association, which hosts the North Iowa Bulls, needs to have the arena begin construction or it will “face some difficult decisions on investment because their ice system is well beyond its normal lifecycle and is starting to have failures.”
In 2016, the hockey association said replacing the 35-year-old ice floor and modernizing its current facility at the North Iowa Events Center could top $1 million.
At the Southbridge Mall multipurpose arena, the association has committed to pay for everything related to ice operations, plus $500,000 in cash, not to exceed $2 million. It would lease the arena and manage it during the hockey season.
ICON has worked on a number of athletic facilities, including hockey arenas in North Dakota and Minnesota.
The two projects – hotel and ice arena – need to run concurrently, Burnett said.
• Here's everything you need to know about Mason City's River City Renaissance Project
1 of 31
The hotel should cost about $17.57 million. This would be paid with a combination of private loans/equity and tax increment finance, or TIF, funds.
This would be about $3 million. It would be paid with TIF funds, along with tax breaks through the Iowa Reinvestment Act.
The new Music Man Square Museum would cost $1.5 million. It would be funded completely with Iowa Reinvestment Act funds.
The skywalk which would connect the Music Man Square Museum to the conference center would cost $2.5 million. It would be paid with TIF money.
The new pavilion is estimated to cost $1.65 million. This would be funded through private grants and Iowa Reinvestment Act money.
Perhaps the most complex funding structure goes toward the ice arena, estimated to cost about $12.55 million. This would be paid through private grants, TIF money, Iowa Reinvestment Act funds, a local option sales tax and a $500,000 pledge from Cerro Gordo County.
All of these estimates are “not-to-exceed” figures, and could change based on how much the Iowa Economic Development Authority awards the city. The money is only allocated if the two ballot items pass with at least a 60 percent approval (or “yes” votes).
The city has spent $150,000 on a predevelopment agreement with Gatehouse, the developer of the proposed hotel. That amount will be returned to the city once the project begins. Another $750,000 could be spent on preconstruction funding, and the maximum amount of the loan the city is giving Gatehouse for the hotel at $4.2 million. The Mason City Chamber of Commerce Foundation is guarantor of all city expenses.
The Iowa Economic Development Authority seems poised to award anywhere between $7.1 million to $10 million in tax breaks for the project. That money would be given to the city on an incremental basis – rather than a lump sum, upfront payment – as long as the two ballot items are approved.
The current development agreement requires Gatehouse to invest 10 percent of the hotel cost. About 26 percent comes from the Gatehouse and its investors, 50 percent from the senior bank loan, and the rest from the city’s $4.2 million loan. Eventually, Gatehouse and its investors will pay $13.37 million of the cost of the hotel. It has to re-pay the $4.2 million loan to the city over a 20-year period.
The hotel, which will probably be developed by Gatehouse pending project approval, would be in the southeastern part of the Southbridge Mall parking lot. It would be 106 rooms, and renderings show it would be a Hyatt Place model, although that has not been confirmed by Gatehouse. There have been concerns about how the hotel would impact parking in the area, but city officials claim there is enough throughout Mason City to handle the load.
The current Music Man Square Museum space would be converted into a conference center with a banquet space that would hold 600 people. The streetscape space would be improved, but remain in place. Along with renovation costs, the $3 million projection includes the resources needed to package and move artifacts to the new Meredith Willson Museum.
A new museum would be built to the east of the hotel, and serve as the home to history considering Meredith Willson, along with housing all related artifacts. It would be connected to the new hotel and the skywalk over South Delaware Avenue, linking it to the new conference center. The museum currently inside The Music Man Square will be moved to a separate, adjacent building. The Music Man Square building will remain intact, as the conference center.
This would connect the museum to the conference center. Newly elected city council member Joshua Masson said at a recent council meeting that the skywalk would be an important factor in attracting possible conferences, adding Mason City has been passed over in the past because it doesn’t have one.
The pavilion would primarily serve as a location for the municipal band to perform. It would be located at the north façade of Southbridge and corresponding plaza, and create new entrances for the mall itself. It would improve acoustics and provide more opportunities for free outdoor entertainment in the plaza.
Perhaps the most complex part of the project, the ice arena and multipurpose center would hold up to 4,400 for concerts and similar events. The Mason City Youth Hockey Club has committed $2 million to this part of the project, and would operate the ice rink for six months out of the year. Because of a memorandum of understanding between the city and club, the arena could only be used for multipurpose events for the other six months. That could change, however, according to city officials.
Goes by Mike Kohan and is president of Kohan Investment Group of Great Neck, New York. KIG purchased Southbridge Mall for $1.5 million in September 2016 and is doing business as Southbridge Mall Realty Holding LLC. As of Nov. 1, Kohan owes $210,854 in property taxes, after paying $28,190 in two tax sale properties (the mall sits on four parcels). If the mall is sold, all commitments related to the project will be the responsibility of the new owners.
A representative of Gatehouse Capital, whose company submitted a proposal when the city put out a request for proposals after Chodur defaulted. Gatehouse wants to build a 106-room Hyatt Hotel in the south parking lot of Southbridge Mall, connect it to The Music Man Square via a skywalk, build a conference center/ballroom in The Music Man Square and move the museum to an adjacent building. The city also received a proposal from Chodur but chose the Gatehouse plan.
The interim city administrator who replaced Brent Trout. He now handles many of the responsibilities of the project. As the city’s finance director, he understands much of the funding structures corresponding to each part of the project. But it is unclear when a permanent replacement will start, who will have many responsibilities in executing the project if the ballot items pass.
Mason City resident is one of the organizers of the "Mason City Says Yes" campaign, made up of residents who support the two public issues on the Nov. 7 ballot. The group submitted petitions with enough signatures to require the public vote.
The Mason City mayor has championed the project from the beginning and made presentations in Des Moines that led to the city's pre-application for state funding to be approved.
The president of San Diego-based G8 Development first proposed to build a Hilton hotel in the parking lot west of City Hall but could not get Hilton approval. He then proposed to build a Marriott hotel in the same spot but failed to meet city deadlines to start construction and therefore defaulted on the development agreement. Chodur is now suing the city for breach of contract with a trial date set for November 2018.
The former Mason City city administrator, now in Topeka, Kansas, was the city's chief negotiator and made numerous trips to Des Moines in support of the project, including his last day on the job.
The late City Council member accompanied Bookmeyer to Des Moines and helped with the presentations to state officials.
If the ballot items do pass, how much money will the IEDA award to Mason City?
1) The project has been in the works for several years now, and some citizens have doubts about the funding and execution of it. Initially, a parking ramp was proposed, costing the city hundreds of thousands of dollars. Now, that has been scrapped.
1) The city's population has declined since 2000, and supporters claim this project would help bring people back to town, especially younger people as the working population continues to age.
The first ballot issue asks whether the city should enter into a lease agreement to construct an ice arena/multipurpose center with a total construction and lease cost not to exceed $18 million.
Reach Reporter Ashley Stewart at 641-421-0533. Follow her on Twitter at GGastewart.