To: Honorable Mayor and Members of Town Council
Thru: David L. Corliss, Town Manager
From: Castle Rock EDC
Title
Resolution Approving the Outlets at Castle Rock Retail Infrastructure Assistance Agreement
Body
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Executive Summary
The purpose of this memorandum is to update Town Council and request direction regarding the potential use of the Castle Rock Business and Development Incentive Program to support infrastructure improvements at the Outlets at Castle Rock.
The Outlets at Castle Rock has submitted a formal request for $900,000 in Town support, to be provided through a combination of permit/fee rebates and a share of sales tax revenues. These funds would be applied toward the development of two “new to the Castle Rock market” restaurant pad sites located on the west side of the property.
This request is part of a broader reinvestment initiative by the property owner. The first phase of the project involved the transformation of the former food court into four modern tenant spaces, which are now occupied by Tumi, Vuori, Sephora, and Tommy Bahamas. The second phase involves the construction of the Huntington Bank pad site and phase three of the project includes two stand-alone restaurant buildings.
Due to inflationary cost escalations related to pad site construction and associated onsite infrastructure improvements, the financial viability of the third phase is now at risk. The requested incentive support is intended to help offset these increased costs and ensure the continuation of this key redevelopment effort and private investment in the property.
Outlets Background
The Outlets at Castle Rock, developed in 1992, are located west of I-25 between Castle Rock Parkway and Meadows Parkway. As the largest open-air outlet center in the State of Colorado, they remain a vital economic driver for the Town, consistently representing a significant portion of the Town’s total budget. The revenue from the Outlets is vital in maintaining the core services of the Town including, parks, fire and police.
In addition to their fiscal impact, the Outlets serve as a regional destination, attracting visitors from across Colorado and beyond. These out-of-town shoppers help support the Town’s financial ability to provide critical Town services for its residents.
Now entering their 33rd year, the Outlets must continue to reinvest to remain competitive in an ever-evolving retail landscape, which includes newer outlet centers, lifestyle centers, regional malls, and online retail platforms.
Fortunately, Craig Realty Group-owner of the Outlets since 2005-is a nationally recognized retail developer with a portfolio of more than 13 shopping centers across the country. They understand the importance of reinvestment and have demonstrated a strong commitment to the Castle Rock location, investing over $50 million to date. These investments have helped attract and retain a premier collection of outlet retailers, maintaining the Outlets’ position as a top-tier regional retail destination and sales tax revenue generator.
The Project
Food court conversion to retail space - This project was part of an overall mall effort to improve the customer experience as well as create additional retail space at the center point of the mall. The food court was being underutilized for sit-down customers and was in an area of the mall that’s highest and best use was to showcase more retail opportunities. The plan is to create more food venues throughout the mall, all on different streets and to add two additional standalone restaurants on the west side of the property. The benefit of this project is to create additional retail opportunities and
offer the customer additional dining choices in a variety of locations around the mall.
Phase one (Food Hall Conversion- Complete)
• Roughly 12,000 SF of additional retail space
• Converted 2 existing food court restaurants and seating area into 4 new retail spaces
• New retail stores - Tumi, Vuori, Sephora, Thommy Bahamas
• Overall cost to the Landlord - Just over $2M
• Exterior improvements - New paint, refreshed stucco, awnings, signage, lighting
• Additional food services being added - Pizza at space 805, Sandwiches at space
• 175, Boba Tea and drinks at space 235. More coming soon.
• Added new customer service area and family style restrooms
Phase Two (Huntington Bank - In progress)
• Develop new building pad with new electrical service, gas line, water, and sewer lines
• Import soil to raise elevation of pad
• Construct retaining wall on the North and South end of the pad
• Build new trash enclosure
• Repave parking lot and stripe
• Install all curb and gutter around pad
• Huntington Bank to start vertical construction of the building
Phase Three (Restaurant Pad Site Development - Contingent on Town Council Approval)
• Construction Start Date: August 1st, 2025 - December 15, 2025
• Demolish existing asphalt, concrete and curb
• Import 30,000 CY of structural fill soil
• Raise elevation of existing pads for restaurants
• Construct large retaining wall along west edge of pads
• Connect new electrical service, gas line, water line and sewer lines to both new pads
• Construct new sidewalks, landscaping, and exterior site improvements for new pads
• Install new larger sewer line to manhole in Factory Shops Blvd.
• Prep (2) new pads for construction of new restaurants
• Repave parking lots and stripe
• Install all curb and gutter around new building pads
Incentive Structure
The Outlets at Castle Rock has formally requested $900,000 in assistance through the Castle Rock Economic Development Program. The request is in line with the Town’s economic development policies; the request includes the following:
• Permit fees and taxes rebate estimated at $625,964.60 (Fee estimate attached). Craig Reality Group would be responsible to pay all permit and fees at the regularly scheduled intervals and would make their request for reimbursement once the project was completed and the restaurants received their certificates of occupancy
• Sales Tax Share of 50% for ten years, limited to Town-related sales tax collected from the two additional restaurants. The sales tax portion of the incentive would only be used to balance the total incentive (including permit and fee rebate) to an amount not to exceed a total of $900,000. Sales Tax for the two restaurants would be collected as normal and at the end of each fiscal year would be reconciled per the agreement
• Each restaurant must generate $4M minimum in annual sales
While the incentives are calculated based on actual permits, fees, taxes and sales tax share collected, actual reimbursements will come directly from the Town’s Economic Development fund to reimburse the Development Services Enterprise.
The Outlets at Castle Rock have committed that should the Town support this request they intend to proceed immediately with Phase Three of the project.
EDC Recommendation
The Castle Rock EDC and the Castle Rock Economic Partnership (Chamber, DDA, DMA, Town of Castle Rock) both support the request to Town Council given the immense private investment that Craig Reality has made in the property and the community over the years. Understanding that Craig Reality has 13 other properties it could potentially invest in we are appreciative that they continue to invest in the vitality of the Castle Rock Outlets.
It is the position of the EDC that the Outlets at Castle Rock’s incentive request warrants the support of the economic development incentive fund for the following specific reasons as laid out in the Town’s economic development policy:
Economic Vitality is a critical factor in ensuring Castle Rock’s long-term
success and in achieving its Vision of being a Self-Sufficient Community; a
community in which Residents can Live, Work, Play and Purchase the
Goods and Services they need; and Create a Tax Base adequate to support
provision of Core Town Services.
With increasing regional competition, it is important to Castle Rock to create and maintain an exceptional Business Climate. A key component is the creation of an Expanded Business and Development Incentive Program.
By supporting The Outlets at Castle Rock, the Town Council will:
• Ensures that Craig Realty Group continues to reinvest in a 33-year-old outlet center
• Ensures that The Outlets at Castle Rock completes phase three of its redesign by adding two significant “new to the market” restaurants that have historical gross sales figures north of $15 million annually (approximately $600,000 in annual sales tax)
• Adds additional sales tax, and dining options for the Town of Castle Rock and its residents
Proposed Motion
Direct Staff to prepare an Economic Development Assistance Agreement with Outlets at Castle Rock as generally outlined herein.
Attachments
Attachment A - The Outlets at Castle Rock Permit & Fee Reimbursement request
Attachment B - The Outlets at Castle Rock Performance Fund Application
Attachment C - Town of Castle Rock Fee Estimate