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Mall at Robinson, Downtown hotels poised for big property value reductions

Theresa Clift
| Tuesday, Feb. 13, 2018, 12:03 a.m.
Shoppers look for Black Friday sales at the Mall at Robinson, Friday, Nov. 25, 2016.
Andrew Russell | Tribune-Review
Shoppers look for Black Friday sales at the Mall at Robinson, Friday, Nov. 25, 2016.
The Hilton Garden Inn downtown on Wednesday, Feb. 7, 2018.
Nate Smallwood | Tribune-Review
The Hilton Garden Inn downtown on Wednesday, Feb. 7, 2018.
The Hilton Garden Inn downtown on Wednesday, Feb. 7, 2018.
Nate Smallwood | Tribune-Review
The Hilton Garden Inn downtown on Wednesday, Feb. 7, 2018.
Hyatt Place on the North Shore on Wednesday, Feb. 7, 2018.
Nate Smallwood | Tribune-Review
Hyatt Place on the North Shore on Wednesday, Feb. 7, 2018.
Hyatt Place on the North Shore on Wednesday, Feb. 7, 2018.
Nate Smallwood | Tribune-Review
Hyatt Place on the North Shore on Wednesday, Feb. 7, 2018.

Property values of a shopping mall and two hotels in Allegheny County could drop by a combined $55.5 million because their owners say online retailers and Pittsburgh's hotel construction boom have hurt sales.

The Allegheny County Board of Property Assessments Appeals and Review, as of Jan. 18, approved assessment reductions for 1,254 parcels, totaling about $177 million in reduced values, meaning just three developments — the mall and two hotels — account for nearly a third of all reductions.

The Mall at Robinson received the largest assessed property value reduction, by far, from about $117 million to $89 million — a $28 million decrease spread over two parcels.

As a result, the Montour School District stands to lose at least $300,000 in tax revenue, said Janet Burkhardt, the district's solicitor.

“Robinson mall is not having any difficulties,” Burkhardt said.

Burkhardt said the mall is in a booming area, and its value is not declining. She said she intends to get an appraisal to counter what she said was an unusually large reduction.

The main parcel in the mall — excluding anchors Macy's, JCPenney and Sears — would drop in value from $108 million to $85.3 million. The other mall parcel set for reduction includes Dick's Sporting Goods.

School districts, including Montour, filed more than half of the property assessment appeals this cycle, as they stand to lose the most tax revenue when values drop because of appeals.

An appraisal submitted by the mall's owners says the value of the mall, which opened in 2001, has dropped partly because online shopping has negatively impacted enclosed malls.

“Three of the mall's four anchor tenants (Sears, JCPenney and Macy's) are experiencing eroding market shares due to competition from e-commerce and management miscues,” the appraisal said. “All three retailers have closed numerous underperforming stores in the last two years, and their respective financial conditions are tenuous.”

Out of the mall's 382,768 square feet, 50,625 square feet were vacant at the time of the appraisal filed in March.

Mall employees said stores are busy and produce high sales.

A Sunglass Hut kiosk has the most sales in the region, said Olivia Coury, sales associate.

The mall is dead sometimes, but in the summer, the kiosk often has to employ two people to keep up with customers, Coury said.

Similarly, the Things Remembered store, which sells engraved items, is a top-performing store with the highest sales in the district, which includes 13 stores in Pennsylvania and two in Ohio, said Katie Davis, store manager.

“At least three or four days a week, it's hectic in here,” Davis said as she sold an engraved clock to a customer Friday.

There are few vacancies in the Robinson mall. A candy store and a home store recently closed, employees said. A wine store recently opened, though, and an H&M store moved to a larger location.

A spokesman for Cleveland-based Forest City, the mall's manager and majority owner, declined to comment on the assessment reduction and vacancy statistics.

Anna Borsos, business manager for Montour School District, said the district can weather a $300,000 drop in tax revenue.

“If it was half a million or a million, then that's substantial,” she said.

Montour lost $1 million in revenue when the mall's value dropped during the last countywide reassessment, Borsos said.

“That was the hardest for the district,” she said.

Downtown hotels losing value, owners say

The assessment board approved a $13.9 million assessment reduction for the Hyatt Place Pittsburgh-North Shore next to PNC Park, and a $13.3 million reduction for the Hilton Garden Inn Downtown Pittsburgh and connected garage, retail and office space in Market Square.

The Hyatt Place reduction would take the property from a total assessed value of about $35 million to $21 million.

Its Florida-based owners, Chatham Lodging Trust, submitted an appraisal in May 2017 arguing the value should decrease because Downtown Pittsburgh has more hotels than it needs.

“Occupancy rates and per-room revenue in the seven-county Pittsburgh region have dropped from a year ago, a period in which more than 2,000 rooms hit the market, according to STR Global, a data and analytics firm that tracks the lodging industry,” the appraisal said.

The appraisal for the Hilton Garden Inn, done March 30, made similar points, citing an STR report that stated 12-month hotel occupancy in the Pittsburgh market was 59.5 percent as of March 2017, down from 65.1 percent for year-end 2015.

According to VisitPittsburgh, a taxpayer-backed nonprofit that promotes tourism in the region, a more recent STR Global report from December shows that 5.6 percent more rooms were sold in 2017 than in 2016, with a 4.5 percent increase in supply.

“This is great news, as the last couple of years have not shown that kind of increase. However, until we can have the demand consistently outpace the supply growth, hotels will struggle,” spokeswoman Melissa Wade said in a statement.

The organization is hoping new ventures in tech and energy industries and new routes from Pittsburgh International Airport will help fill hotels, she said.

The assessment board approved a $13 million reduction for the Hilton Garden Inn, from about $39 million to $26 million, owned by Washington County-based developer Millcraft Investments.

The Pittsburgh Public School District has filed appeals contesting the value reductions of both hotels, Burkhardt said.

Double dipping?

Properties approved for Tax Increment Financing give developers a break on a portion of property taxes over a period of time to help pay for infrastructure improvements.

The Robinson mall was built with two TIFs, and the main mall parcel is still included in one.

Now, the owner again wants to decrease the amount in taxes it pays.

The Findlay property also received a TIF. The Hilton Garden property is not technically in a TIF but is surrounded by one .

Properties in TIFs that appeal for reductions in assessed values suggest that the TIF is not doing its job of revitalizing the surrounding area, but it is not an uncommon strategy for companies nationwide, said Michael Hicks, an economics professor at Ball State University, who studies the topic.

“Companies find it difficult once they've received benefits like this to not go back to the well,” Hicks said.

Burkhardt agreed.

“The fact that they're already getting a public benefit from the taxpayers and now they're asking for more is frustrating at best,” Burkhardt said.

If necessary, Montour School District would take legal action regarding the Robinson mall assessment reduction, as Pittsburgh's district did when Rivers Casino and the Omni William Penn Hotel sought reductions, she said.

“They're already getting a preferential land assessment, and I'm not just going to hand out another one,” Burkhardt said. “I think they have to prove their case.”

Theresa Clift is a Tribune-Review staff writer. Reach her at 412-380-5669, or via Twitter @tclift.

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