Storm clouds are gathering on the horizon for East Grand Forks' Riverwalk Centre mall as its anchor tenant seeks bankruptcy protection and prepares to move out.
Ben Franklin Crafts and its predecessor, Crafts Direct, have been a dominant presence at the city-owned mall since September 1999. Losing the store would leave nearly half of the mall dark.
The store now is holding a massive sale to reduce inventory and, store signs say, facilitate a move to a new location at the start of the year. If Ben Franklin does get Chapter 11 protection, it would be able to hold off creditors while management works to return to profitability.
Store president Jo Anne Martin could not be reached for comment Tuesday, but an employee said managers are looking for a smaller space.
Jim Richter, the city's economic development chief and de facto mall manager, said he preferred to let Martin speak for the business. But, as far as he knows, he said, Ben Franklin had not given notice yet that it plans to leave the mall.
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The store still owes the city something on the order of $350,000 in back rent.
Early troubles
The struggle goes back to at least 2003, when Martin purchased and re-flagged the old Crafts Direct.
That year, city records say, Ben Franklin paid $108,500 in rent; a full year's rent is about $137,500. Every year after that, rent payments got lower and lower much lower. So far this year, the city got an $11,500 check in April and hasn't gotten any more since.
City officials such as Richter have been reluctant to twist arms at the mall mostly because rent already is below market rate at the location-challenged mall, far from the hustle and bustle of the area's main retail district on Grand Forks' 32nd Avenue South.
"The truth is, when we force the issue, the business is toast," Richter said in 2004, the year the mall lost $78,600 because of delinquent rent payments from a few other businesses.
But for Ben Franklin, things went from bad to worse.
In September of this year, Martin, the store's president and sole shareholder, filed for Chapter 11 bankruptcy protection, court records show. She declared debts worth $1.6 million and assets a little more than half of that. There are somewhere between 200 and 1,000 creditors to satisfy, including the Internal Revenue Service, which ranks No. 2 among the unsecured creditors. The Herald is No. 5.
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During this stretch, Ben Franklin also was hurt when Larae Fontaine, one of its employees, began stealing from the store, in what she later would confess amounted to more than $40,000.
Stuck in a corner
All of this is bad news for local taxpayers, who have been subsidizing the Riverwalk Centre mall since at least 2002, when it lost $23,000. The losses mounted as other stores left over the years, only some of which were replaced.
Earlier this year, the mall was dealt a blow when the Buffet House, a Chinese restaurant that had been there since 2002, abruptly closed in June, leaving food to rot in the freezers.
Ironically, the city recently hired a consultant, former Grand Cities mall manager Larry Stammen, to find a way to turn the mall around. He was not available to comment Tuesday, but it's clear that his first big task will be to find a tenant to fill the hole Ben Franklin will leave.
City leaders have said they don't want to own the mall, given that it competes with private businesses. They bought it in 1997 as a temporary City Hall and as a shelter for the numerous downtown businesses left homeless after the devastating flood that struck in the spring of that year. The problem is they paid the $1.2 million cost of the mall mostly with federal funds, and the government requires a minimum 10-year commitment. That's the minimum. The norm, according to Richter, is 20 years.
Richter said he is unsure whether the government would allow the city to sell the mall in 2007 or require it to hold the property for 20 years. For that matter, he said he's not sure whether the government would require repayment.
Still, even if the city were allowed to put the Riverwalk Centre on the market, the question is who would buy it when it's losing money and can't retain tenants.
