City Creek moves ahead despite economic downturn

SALT LAKE CITY — When City Creek Center opens for business next March, it will include 760,000 square feet of retail space housing stores like Tiffany and Coach, a 30,000 square foot retractable glass roof for open-air shopping.

Those figures may make the project sound impressive, but one little fact stands out. Next year City Creek is scheduled to be the only major shopping mall that opens in the U.S., according to the International Council of Shopping Centers. After a recession, with high unemployment and falling housing prices, there's one reason City Creek even happened — it pays to avoid debt.

The estimated $1.5 billion development from The Church of Jesus Christ of Latter-day Saints and its Bloomfield Hills, Michigan-based partner The Taubman Co. moved forward during a time of recession, when progress on most other major U.S. retail developments has either slowed or stopped.

"The uniqueness of City Creek is not the project itself," said Darrell Tate, a retail specialist for Commerce Real Estate Solutions. "It's the fact that it was able to move forward."

Underwriting standards have fundamentally changed since the boom days of 2006 or 2007, Tate said, making it more difficult for developers to secure financing for retail developments.

The LDS Church, however, is "debt-averse," said Dale Bills, spokesman for the for-profit church subsidiary City Creek Reserve Inc. No loans were taken out, nor was any public money sought. Those specifics helped bring in an established national partner.

"Before we started any demolition and eventually construction, reserves were set aside," Bills said. Those funds, he noted, were generated by church-affiliated businesses, not tithing donations from church members. Because of that, "we were able to build through the recession."

Taubman operates 26 retail centers in 22 markets nationwide, possessing the managerial expertise and national retail relationships that LDS Church officials say they needed to make the project a success. It's the partnership that made City Creek survive while others did not, Commerce Real Estate's Tate said.

"Many of the projects in major metropolitan areas were put on hold because there was just too much risk associated with those dollars," said Darrin Liddell, managing director of the New York-based Integra Realty Resources, a real estate advisory firm.

Now, with the economy showing signs of recovery, City Creek Center is poised to attract retail tenants at a time when they're looking for viable expansion opportunities.

"The majority of growth for retailers is driven by expansion," Tate said. "While the vast majority of retailers are certainly not aggressively expanding, (City Creek offers) a unique, good opportunity to do so. I think that bodes very well for the success of the project."

During a speech honoring H. David Burton, presiding bishop of the LDS Church, earlier this year. William S. Taubman, the company's chief operating officer highlighted the timing of the development.

"To some, pursuing such an ambitious project in the depths of the Great Recession may seem a bit foolish," Taubman said in March. "To others, including Bishop Burton and me, it is quite the opposite. You continue to move forward when times are tough so you are prepared to succeed when the economy improves.

Retail and food sales have risen 7.2 percent in the past year, according to U.S. Census Bureau data. Because of that "it looks like we will be opening City Creek Center at an ideal time," he said.

To be sure, not all parts are upbeat. The retail sector nationwide "has continued to experience distress" in 2011, "two years after the technical end of the recession," said Ryan Severino, a senior economist with New York City-based commercial real estate analysis firm Reis Inc.