HUNTINGTON — The Huntington Municipal Development Authority has taken the first steps in becoming the majority owner of Pullman Square’s shopping center.
“This is a once-in-a-lifetime opportunity for the city and the Huntington Municipal Development Authority to take a bold and innovative approach to protect the future of Pullman Square as a whole,” Huntington Mayor Steve Williams said.
Williams asked the HMDA board of directors to approve the plan during a special meeting Thursday. The measure — as well as approval for donating land to Marshall University for its baseball stadium — was approved unanimously, 12-0, with one board member absent.
“These decisions are made by the Huntington Municipal Development Authority and not City Council because they are able to do certain things that a city can’t, nor should it ever do,” he said.
Williams said the plan calls for HMDA to create a limited liability corporation called Downtown Investment and will use $7 million of the $11 million it received from the city’s American Rescue Plan funds in April for economic development to acquire 72.5% of Metropolitan Huntington.
Currently, the Tri-State Transit Authority and Metropolitan are the owners of the properties that collectively create Pullman Square. Under the plan, TTA would continue to own the garages, 14 of the 16 theaters that make up Marquee Cinemas, the green square and some of the internal roads, which are leased to Metropolitan Huntington.
“We are still negotiating a new lease agreement with TTA,” Williams said. “Its board will still need to approve the new terms of its lease.”
Williams said two of Metropolitan’s owners, Tim Rollins and Bill Dargusch, will continue to each own 13.75% of the company and will continue to manage Pullman Square with the oversight of Downtown Investment.
“Metropolitan Huntington has successfully navigated a difficult economic climate to the benefit of the city,” the mayor said. “We want that to continue with oversight from Downtown Investment.”
Williams said the tenants of Pullman Square will be able to take comfort in knowing there will be a local majority owner that will act in their best interests.
“We want to do something to make sure for the next 50 years Pullman Square is protected,” he said. “That’s exactly what this plan will do.”
Williams said the discussions regarding Pullman Square started about a year ago, when city leaders took a proactive approach to learn how the COVID-19 pandemic had affected the shopping center.
“Through these conversations, the city learned that COVID had a significant economic impact on the restaurants and theater in Pullman, much like it had taken a toll on those businesses across the country,” he said. “We also learned that three of Metropolitan’s five owners, all whom live out of state, were expressing interest in divesting part of their ownership of Pullman Square and were entertaining offers. We wanted a seat at that table. As a result, the Huntington Municipal Development Authority initiated negotiations with Pullman ownership about becoming the majority owner.”
Williams said his plan protects the financial well-being of Pullman Square, which he called “the linchpin” of the revitalization of downtown Huntington.
“When you look at other lifestyle shopping centers in this region, none are owned by public entities. They are owned by out-of-state, private corporations whose primary emphasis is the bottom line,” he said. “Yet, as shopping centers have steadily lost tenants or closed altogether, it has a tremendous impact on the psyche of the communities in which they are located. Local governments and elected leaders ultimately are looked upon to mitigate the economic damage. We didn’t want that to happen with Pullman Square, like we have seen at other shopping centers in our region. Approximately 500 people work at Pullman Square, and the investments of all of the local business owners’ and property owners’ livelihoods depend on the economic vitality of downtown Huntington.”
Williams said since Pullman Square opened in 2004, the assessed tax value in the downtown has increased by $21 million.
“Before Pullman Square, you could have shot a cannon off on 3rd Avenue in the central business district and not hit anything,” he said. “It was the driving force behind the redevelopment of all of the buildings across the street on 3rd Avenue.”
Cathy Burns, executive director of the Huntington Municipal Development Authority, said a tax increment financing district was established in the area about 16 years ago. The TIF district was formed around Pullman Square to develop the area and complete projects such as making 3rd Avenue a two-way street.
A value was established on downtown Huntington and Pullman Square, which the city anticipated would go up once the area was developed, Burns said. The 30-year bond on the TIF district was paid off early, in 15 years, by the increment of property taxes.
“Pullman Square outperformed expectations,” she said. “The Pullman development, it did exactly what we had thought it would do. It created more investment downtown,” Burns said. “It allowed properties to increase in value, which generates more income for the county, for our school board, for policing, all of that. There’s that whole ripple effect.”
Burns said Metropolitan Huntington will continue to be a tax-paying entity.
“Customers of Pullman Square will see no visible changes,” she said. “The existing leases with commercial tenants at Pullman Square will not change.”
David Graley, a 30-year veteran in the banking industry with J.P. Morgan Chase, was brought in to help with the negotiations and set up some guiding principles to move the plan forward.
“I retired in 2008,” he said. “I spent my 30-year career specializing in commercial real estate transactions and financing commercial transactions. I have been a part of this plan from day one.”
Graley said over the past year he looked at the numbers and got to understand the tenants and current management.
“As I reverse-engineered this plan, I concluded that $7 million was needed to make it happen and give the certainty everyone was wanting,” he said. “A minor part of the $7 million is to buy out the current owners. The major part of it will be used to reduce debt.”
Graley said the city has a commitment from Community Trust Bank to reduce current debt to $8.8 million, saving nearly $400,000 a year.
“Reducing the debt of Pullman Square provides more operating cash to invest in Pullman Square and to ensure it remains viable moving forward,” he said. “Having more economic flexibility is a must in the ever-changing retail market.”
Graley said he wanted to make sure he structured the deal so a sufficient cash flow was developed.
“I didn’t want the city or HMDA to have to subsidize it,” he said. “Not only do I not want them to subsidize it, but I want them to get a return on this investment. The structure we have in place shows that in a year or two, Metropolitan Huntington should be able to perform to give us a return on our investment each and every year.”
Williams said the plan is the culmination of the first of many steps in the process before the deal closes.