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Phipps Plaza breaks ground on luxury remodel, seeks tax break

Crews in hard hats are about to make Atlanta’s fanciest mall less mall-like.

The $300 million remake for Phipps Plaza in Buckhead will include plenty of upscale additions, with one important exception: No new retail stores. In fact, the mall is dropping from three anchor department stores to two, with the recent closing of Belk.

Phipps’ owner, one of the nation’s largest mall holders, could receive about $9.5 million in local tax breaks for the luxury project in Atlanta’s most affluent enclave.

The moves at Phipps are only the latest shift nationally to ease back on what has been the main pillar of America’s retail palaces — retail stores — in favor of more entertainment, office and dining offerings.

In addition to a Nobu hotel and restaurant, plans call for a 13-story office tower, a sprawling Life Time fitness center, more restaurants and a grassed area for gatherings.

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The additions are expected to be completed in phases between early 2021 and the summer of that year, according to company.

RENDERINGS OF PHIPPS PLAZA ADDITIONS

Phipps Plaza has broken ground on a redevelopment that will include a Nobu restaurant and hotel, a 13-story office building and a 90,000-square-foot Life Time fitness complex. Source: Simon (The Atlanta Journal-Constitution)

On Thursday, executives of mall owner Simon Property Group officially kicked off construction on the project they first announced last fall.

The event included officials swinging sledge hammers at a wall set up in front of the Belk building, which is slated to be demolished along with a portion of nearby parking decks. A fire station below the existing deck will be relocated.

Among those doing the destruction Thursday were actor Robert De Niro and his fellow investors in Nobu, a luxury hotel and restaurant chain that will become a centerpiece of the Phipps additions.

Robert De Niro (left) and Chef Nobu Matsuhisa, partners in Nobu Hotel and restaurant, will bring their business to a re-imagined Phipps Plaza. Photo: RYON HORNE / RHORNE@AJC.COM (Ryon Horne)

David Simon, Simon’s chairman and chief executive, pledged, “We are going to continue to invest in the Buckhead area in a major way.”

Shoppers have witnessed the slippery terrain facing retailers and shopping center owners.

Sears, once among the most common staples in American and Atlanta malls, filed for bankruptcy court protection this week. Sears Holdings, which executives are hoping to keep alive, announced it will close an additional 142 of its Sears and Kmart stores, including the last two Kmart units in Georgia.

Some malls in metro Atlanta continue to struggle, such as Gwinnett Place, where many retail spaces remain shuttered and a woman’s dead body went unnoticed in a back room near the mall’s food court for perhaps two weeks during last year’s holiday shopping season.

Phipps and its sister mall, Lenox Square, have long dominated Buckhead’s shopping scene. Both are doing “amazing” Simon said, adding “I rarely use that word.”

“You can’t put malls into one category,” said Simon, who leads a company that owns more than a hundred of them. “The good malls are actually thriving.”

Locally, the company owns suburban malls Town Center at Cobb and the Mall of Georgia in Gwinnett. Both of which, he said, “are moving in the right direction.”

But for the industry and nation overall, he said, “we don’t need as many department stores.”

Beyond the Belk closing, though, Simon said he doesn’t foresee anchors closing at either Phipps or Lenox. At Lenox, he said, he anticipates announcements soon about new layouts for stores already there.

Mall owners throughout the nation have pushed to add new draws beyond stores. They also have tried to squeeze more money out of their expansive properties.

Simon has at least 12 mall redevelopments underway nationally. And around Phipps, Simon in previous years had added an AC Hotel, apartments and an office tower.

Al Nash, the chief executive of the Development Authority of Fulton County, said the challenge facing malls — “some people refer to them as dinosaurs” — factored into his thinking about of tax abatements for the Phipps project. He said without tax breaks the project might not get done or its scope might be smaller.

“Our job,” he said, “is to grow the tax base.”

Under the current proposal, the owner would continue to pay property taxes, but the value of the part of the property being revamped would be frozen at first and the tax value of the additions would be gradually phased in over 10 years.

Nash said the abatement would result in about $9.5 million less in property taxes over a decade than if the improvements were fully taxed as soon as they were put in place.

Nash said the tax break will encourage Simon to energize the area and produce a development that ultimately will generate more in local property taxes. The hotel also would generate hotel/motel tax revenues for the area, he said.

The Development Authority of Fulton County is expected to vote on the project, possibly in November, according to Nash.

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