Tampabay: Hard times beseige Channelside

TAMPA -- It was the back side of happy hour Thursday in a city parched for waterfront watering holes, but the outdoor bar overlooking Garrison Seaport at Stump's Supper Club was empty.

With its facade reminiscent of a Hollywood movie set, the surrounding Channelside mall felt more like the Old West after the gold rush. Instead of saloon music, Nat King Cole sang The Christmas Song over the entertainment mall's sound system, but there was hardly a nose for Jack Frost to nip.

"It's not very busy," said Heather Frost, 30, heading with two friends for a night at Howl at the Moon piano bar, next to Stump's. "That's kind of nice, I guess."

Unless you own Channelside.

And in a far different setting two weeks ago, representatives of the owner acknowledged what appears evident to any Channelside visitor: Tampa's second newest mall is hurting badly.

In unusually blunt language, they said that the mall hasn't lived up to expectations. It's losing money. Prospects remain poor for the foreseeable future.

"It should not have been built at the time it was built because there is a complete lack of demand for this retail rental space," said Robert Kelley Jr., an attorney with Holland & Knight who represents Orix Real Estate Equities of Chicago, the mall's owner.

It's rare for businessmen to publicly acknowledge hard times, lest by doing so they add to them. But Kelley was challenging the property tax bill for Channelside on behalf of Orix. He was contending that the $17.1-million assessed value calculated by the Hillsborough Property Appraiser's office was excessive.

Kelley was accompanied by an appraiser and the property manager for Channelside. Here is what they said, according to a tape of the Nov. 16 meeting:

Channelside is collecting no rent from the tenants it does have, and won't until at least April of next year, an incentive to get them to stay. Stump's and Howl at the Moon won't pay rent until December next year. Unlike them, most of the other businesses that have opened aren't making enough money to cover their rents if Orix were charging.

Orix had to take ownership of the 10-screen movie complex in anticipation of Regal Cinemas declaring bankruptcy, and the theaters are losing money monthly. At least three other merchants, including prospective anchor Charley's Crab restaurant, pulled out after signing leases when they saw the thin crowds.

"They started their construction then said "There's no way,' " said Michael McElveen, an appraiser with Urban Economics Inc. in Tampa.

Also, Orix is now spending additional money beyond the $49-million it cost to build Channelside to fix design flaws, mainly adding an entrance closer to parking.

But the real blame lies with timing, the Orix representatives said. And it goes beyond the fact Channelside opened early this year shortly after the debuts of two similarly styled malls, including nearby Centro Ybor in Ybor City.

An anticipated hotel on adjacent property never materialized. A trolley line linking Ybor City with the Convention Center with a stop at Channelside is still under construction. And cruise passenger traffic next door hasn't been as brisk as expected.

"This whole shopping center was built on a house of cards that never came to fruition," McElveen said. "It's kind of like the hotel built out in the desert because someone thought the interstate was going to come through, but the interstate never got built."

The group lost its argument with the Property Appraiser's Office when a hearing master accepted its assessment.

Kelley declined comment Friday, referring a call to the property manager. McElveen stood by his comments when reached at his office.

Sim Wilson, managing director of asset services in Florida for CB Richard Ellis, the prominent national real estate company that is now managing Channelside, said the comments need couching.

The biggest hurdle for Channelside has been the lack of tenants committed to leases when the mall opened in January. The economy contributed to that, Wilson said.

The type of businesses Channelside is attracting require enough of them to create a destination where customers can hop from one nightspot to another.

At the time the appraisal was conducted in January, Channelside had 28 percent of its about 220,000 square feet leased, according to the testimony at the Nov. 16 hearing. Today it is 61 percent filled, Wilson said.

Orix is waiving the rents to ensure the businesses that joined early have a chance to establish their customer base, Wilson said. As part of a large international corporation, it can absorb the short-term losses. He declined to discuss how much the company is losing on Channelside.

"They are singularly funding this project to make it float and they will make it work," Wilson said. "Everybody wants things done yesterday. We believe that over the next 18 to 24 months, we will have a very successful project.

"There's not a lack of demand for this space. It's just the demand was not during the initial time frame."

He said his company is working hard to land new tenants. He said the pullout of Charley's Crab referenced during the property tax hearing had as much to do with a change in ownership of the restaurant's corporate chain.

CB Richard Ellis is negotiating leases with two new restaurants it expects to open on the second floor in February, Banana Joe's and Margarita Mama. And in another move that in many ways underscores the mall's desire to fill space, the spokeswoman for the Greater Tampa Chamber of Commerce confirmed Friday that its offices may relocate from downtown to Channelside next year.

"It's very imminent," said Beth Leytham, vice president of public affairs for the chamber. "If being there on the ground floor helps Channelside, we're all about it."

While the chamber may not seem like the ideal match for a mall geared primarily toward entertainment, Leytham said the community business booster has large numbers of people visiting its office daily. They'll be looking for places to entertain, and invest.

Wilson said they can do so in an attractive waterfront center, with an open courtyard that can hold large receptions.

Additionally, he said, Channelside will soon have an entrance cut into the shell of the building closer to parking, the Florida Aquarium and cruise terminal. The current mall entrance was initially shifted in anticipation of a hotel getting built across from the west side of the mall.

The entire complex is built on public land managed by the Tampa Port Authority. The poor performance of Channelside means the port is not making much on its lease with the mall.

At its current size, Channelside must pay at least $198,000 in annual lease payments, an amount based on a 90-cent charge per square foot. The charge was discounted the first year. It will climb every five years under terms of the 40-year lease.

But the port also requires Channelside to pay an escalating cut of the rent collected. As one measure of the potential draw of the mall, the port requires a payment of 15.5 percent of all rent collected in excess of $5-million.

By collecting no rent now, Channelside is not passing any additional money to the Port.

"We do believe they will be successful in the not-so-distant future," said Port Public Relations Manager Lori Rafter. "We have high hopes for the project."

So does Mark Gibson, president of RNHM, the company that operates Stump's Supper Club and Howl at the Moon. His were among the first businesses at Channelside.

He said the two could afford to pay rent now, but he has instead socked that money into advertising and marketing for the nightspots. The outside bar may have been slow Thursday, but inside the restaurant a respectable crowd ultimately turned out, he said.

Most weekends are good. The early part of the week can be a little unpredictable, as it can for most restaurants, Gibson said.

Still, he is eager to see the management group land some new tenants soon.

"If Channelside doesn't add additional shops, it's going to be hard to carry the project at some point on the backs of two tenants," Gibson said. "We're happy today. We're just a little nervous long term."

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