New York City’s first outlet mall, a centerpiece of efforts to revitalize Staten Island’s North Shore, hasn’t been paying on an $8.5 million low-interest city debt for months, records indicate. 

Empire Outlets, which boasts priceless views of Manhattan and Brooklyn, has missed payments on a loan from the New York City Economic Development Corporation (EDC), according to the corporation’s enforcement reports dated June 1 and August 1

The “project has not been making payment on EDC Loan,” the reports say. The documents additionally note: “Project was not completed by Project Completion Deadline.”

Missing any one of three phased “completion dates” at the end of 2016, 2018 or 2022 may trigger financial penalties under a 2014 lease agreement between St. George Outlet Development LLC and the city Industrial Development Agency, which also granted Empire Outlets tax exemptions. The lease lists a base rent of $1.

Out of $8.5 million owed on a 30-year loan granted in 2016, St. George Outlet Development had paid $485,310.53 as Oct. 1, 2019.

Representatives for EDC didn’t respond to multiple inquiries from THE CITY prior to publication of this story. The parent company of the developer, BFC Partners, did not respond to requests for comment.

A Retail Disaster

After a three-month pandemic-driven shutdown this spring, Empire Outlets is officially open for business. But with tourism floundering and daily ferry rides down to under 23,000 a day, a 65% drop from a year ago, shoppers have been scarce.

Tim Savage, a retail specialist at NYU’s Schack Institute of Real Estate, said the widespread financial impact of COVID-19 is sending the industry reeling. 

“This is typical during natural disasters, it’s just the size and scale of this natural disaster is so large,” he said. “I would not be surprised to hear of missed loan payments.”

Empire Outlets near the Staten Island Ferry terminal, Aug. 25, 2020. Credit: Jose Martinez/THE CITY

The 340,000-square-foot retail and hotel complex, which has struggled to fill its storefronts, cost $350 million to build. Nearly $100 million of that came from state and city subsidies, according to the project plan approved by the state development authority. 

Said Savage of the subsidies: “It does bring up the broader topic of: Is this the best use of taxpayers’ money?”

The aid included an $11.5 million city-funded grant in 2016, EDC reported to the state Authorities Budget Office.

That ABO report also lists an $8.5 million, 30 year loan at 3% interest to a similarly named firm that has received past EDC support, St. George Development LLC, at that company’s East New York, Brooklyn, address.

On Tuesday, after this story’s initial publication, EDC contacted THE CITY to state that the $8.5 million loan was in fact made to St. George Outlet Developer LLC.

Half Empty

The outlet mall first opened to the public in May 2019 — yet about half its storefronts remain empty. The developer has also blown past its own deadlines for the long-awaited food hall and beer garden on the mall’s closed-off fourth floor, where construction is ongoing. 

An earlier blow to Empire Outlets came in 2018, when other developers suddenly abandoned plans to build the world’s largest Ferris wheel next door. The borough’s politicians and business groups say the setbacks are no reason to give up on the mall. 

Linda Baran, president and CEO of the Staten Island Chamber of Commerce, said the city should consider giving further aid to Empire Outlets, given the mall’s outsized role in the borough’s economic development goals.

“I do think the city needs to look at larger businesses, case by case, and see what’s the reason behind it and make a judgment call on how important it is to the city’s economy for certain projects to be successful and be able to continue,” said Baran. 

“You know, what’s the reasoning behind the late payments? Is it that they haven’t gotten paid from their tenants? I don’t think everybody should be given a free pass, but I do think that you have to look at the circumstances behind some of those decisions,” she added.

Stores in Staten Island’s Empire Outlets display coronavirus safety measures, Aug. 25, 2020. Credit: Jose Martinez/THE CITY

Spokespeople for Councilmember Debi Rose, who was instrumental in allowing the mall to be built on city-owned land, and Borough President James Oddo, a frequent champion of the project, didn’t respond to requests for comment. 

Meanwhile, construction contractors have also taken legal action, claiming to be owed money. Last week, Staten Island-based New York City Acoustics, Inc., became the latest to sue, with the City of New York and Comptroller Scott Stringer as defendants along with BFC. The company claims it is owed nearly $670,000.

Savage still sees possibilities for Empire Outlet to thrive — if it can reinvent itself for the post-pandemic world. 

“A mall like Empire, given its location, will have to be experiential. It will have to involve something that can attract potential consumers that doesn’t necessarily involve buying clothing,” he said. “They have to essentially think about the type of things that Amazon cannot deliver.”