SPRINGDALE, Ohio — A Texas developer who proposed a billion-dollar makeover for Tri-County Mall in 2021 has lost control of the property after defaulting on a $28 million loan that was used to acquire the 76-acre site.
But Michael VanHuss hasn’t lost hope of transforming the mostly vacant mall into an upscale apartment community known as Artisan Village.
“We have no intention of losing the property,” said VanHuss, managing partner at Park Harbor Capital in Dallas. “We have fought for over a year in some of the most challenging times commercial real estate has seen in a while. We have no interest in losing our capital. We have no interest in losing this property. And we’re committed to delivering this project to the city.”
VanHuss has been the point man for Artisan Village since November 2021, when a joint venture between Park Harbor and Houston-based Market Space Capital LLC approached the city of Springdale with a plan to transform the long-troubled mall.
Developers moved quickly out of the gate, securing a development agreement with Springdale in December and a tax-increment financing deal worth up to $200 million in April. In May, it announced the name Artisan Village and in June, it secured Springdale Planning Commission’s approval for its first-phase site plan.
But trouble was already looming by then, according to a foreclosure lawsuit filed in November by Reef Private Credit LLC, a Utah-based lender. Reef is seeking $37 million in damages for principal, interest and penalties that allegedly flowed from a series of missed milestones.
By the end of July, the joint venture had failed to find a construction lender as required by loan documents. In September, it missed another milestone to secure $75 million in bond financing from the Port of Greater Cincinnati Development Authority. In December, it missed a third milestone to pay off half of its original $28 million loan.
“We weren’t as capitalized as we needed to be when we made this acquisition,” VanHuss said. “That’s just the reality of it. But we didn’t intend to encounter the challenges that we encountered.”
The biggest challenge was a series of rate hikes by the Federal Reserve, which locked up commercial lending markets and made the project more reliant on tax-increment financing.
”Our entire finance strategy was centered on use of TIF proceeds to pay off our original acquisition debt and then to move into infrastructure,” VanHuss said. “That did not materialize for various reasons.”
Springdale Economic Development Director Andy Kuchta confirmed the city rejected VanHuss’ proposal for a roughly $50 million bond issue in 2022 but defended the decision because much of the money would have been used to refinance debt.
The proposal “lacked leasable commercial space and did not complete the necessary infrastructure enhancements to facilitate the construction of new commercial space,” Kuchta said via email. “Both the Port Authority and the City's financial advisors determined that selling bonds under these circumstances would be difficult, if not impossible. Moreover, it would be financially imprudent for the City to impose a $50 million tax lien on the property without additional approved financing for new construction which would generate new property value for TIF revenue.”
Although they disagree about the bond issue, Kuchta and VanHuss say they’re willing to work together to keep the project alive.
“The city of Springdale remains committed to realizing the vision of a dynamic mixed-use development on the site, comprising residential, retail, dining, entertainment, office, and other complementary amenities,” Kuchta said. “The city will continue to evaluate any proposed development and financing structures that advance this project.”
VanHuss said Reef Private Capital recently extended a settlement offer that would bring a mixed-use developer from California into the project, replacing him as lead developer. VanHuss declined to name his potential new partner, but said he’d rather “deliver the project” than remain its lead developer.
“Would I like to be able to finish the job I started? Absolutely. Some of that’s within my control and some of it’s not," VanHuss said. “Would it give a solution to the budget? Absolutely. Is it the right solution for us as owners and investors? That’s something we’re trying to evaluate."
Reef Private Credit did not return a call seeking comment.
While settlement talks continue, the property is being managed by CBRE Inc. Managing Director David Browning, a court-appointed receiver.
If he’s able to regain control, VanHuss expects the project will be different than the adaptive re-use concept he originally planned for the mall. VanHuss now expects to demolish the entire mall structure, except for two parking garages and the former JC Penney store. He also expects to sell more parcels than previously planned, instead of owning and operating the real estate long-term.
But he expects the development mix to remain true to the original plan, with about 500 apartment units and 100 rental townhomes in the project’s first phase, along with community space, a dog park and a hotel. He said two national grocery chains are interested in opening stores on the site as are two hotel operators.
“There’s a line of leases that we could sign tomorrow. There really are,” VanHuss said. “But everybody has to believe that this project has the ability to go forward. And that’s the question mark.”
