December 16, 2018
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Court asked to appoint outside manager to handle Bangor Mall finances

Lori Valigra | BDN
Lori Valigra | BDN
The troubled Bangor Mall, which has been headed for foreclosure after defaulting on a loan in October 2017, faces more problems. A company representing its lenders filed a motion in Penobscot County Superior Court in Bangor on July 5 seeking to appoint a receiver to protect the interests of the lenders. The complaint alleges, among other things, that the Bangor Mall has not paid rents to the company.

The Bangor Mall, awash in uncertainty since its owner defaulted on a loan last fall, is the target of July 5 court filings that aim to assign an independent person to handle the mall’s finances and property.

MSCI 2007-IQ16 Stillwater Avenue LLC, a company formed in Maine in January 2018 to handle the mall’s property on behalf of the trustees of the defaulted loan, filed a complaint against Bangor Mall LLC earlier this month. MSCI is asking the Penobscot County Superior Court in Bangor to appoint a receiver to handle the mall’s property, rents and other items of value covered under the loan agreement.

Stephanie Williams, the attorney at Duane Morris LLP in Portland who filed the complaint for MSCI, declined to give details about the complaint or what it means for Bangor Mall’s future.

[A brief history of the Bangor Mall]

“We have no information to share with you,” she wrote in an email to the Bangor Daily News.

Contents of the court filings and actions by the potential receiver indicate the loan trustee is examining options for the Bangor Mall. Appointing a trustee is a typical step in a foreclosure process, experts say. However, the potential receiver also is advertising the mall for lease on its website.

The complaint was accompanied by two documents, which a court clerk described as 2½ inches thick each and containing exhibits listed in the complaint. It also included a consent motion to appoint a receiver that included an affidavit and a proposed order for the motion to appoint a receiver.

Williams filed all the documents, dated July 5, with the court last Friday.

A court clerk said Superior Court Justice Ann Murray is reviewing the documents. It is not clear when she will make a decision on MSCI’s request for a receiver.

Why a receiver?

Experts on commercial loan defaults and property foreclosures say appointing a receiver can protect the assets of property, and may be part of a foreclosure process.

Receivers have different powers in different states, said Andrew Herz, counsel at Patterson Belknap Webb & Tyler LLP in New York. Herz, whose specialties include receivers and commercial foreclosures, does not practice law in Maine and said the judge will decide the scope of activities a receiver can handle.

“Normally, in most jurisdictions, mortgage holders do not like to take possession of the mortgaged property because it could create liability for the mortgage holder,” Herz said. “Rather, they seek to have the court appoint a receiver who acts as a fiduciary under the direction of the court.”

MSCI has asked for the appointment of a specific receiver, The Woodmont Co. of Fort Worth, Texas, which Herz said could potentially leave MSCI open to liabilities of the mall.

Parties in commercial loan default cases can be secretive. Mall owner Simon Property, special loan servicer LNR and the Bangor Mall are among those that have either declined comment or not answered phone calls by the BDN since analysts warned in August 2017 that the $80 million loan Simon took out using the mall as collateral was headed toward default.

LNR, the Miami, Florida, company that is handling the defaulted loan, has offered little insight since the default in its monthly update comments published in reports from Trepp, a New York-based commercial real estate data firm.

LNR has noted since January 2018 that the lender is performing pre-foreclosure due diligence on the mall. LNR did not return calls for comment on the new court filing.

Watching the courts

The silence of the parties involved in the case leaves it up to experts who follow loan defaults and foreclosures to interpret the twists and turns that can take place as properties move toward a sale or foreclosure.

Even when a property appears to be progressing toward a foreclosure, the owner may change their mind at the last minute and pay off the loan, Manus Clancy, senior managing director of data research at Trepp, said in February when LNR first said the lender was moving on pre-foreclosure due diligence and expected the foreclosure to close March 7, a date that has slipped several times. In that sense, it is similar to what may happen at a house closing or foreclosure when buyers or sellers change their mind.

The July 5 filing is the first move that MSCI, the loan trustee, has made in a Maine court. There have been no foreclosure filings to date with the court nor at the Penobscot County Registry of Deeds, the two places a foreclosure filing typically would be made.

The appointment of a receiver may be part of the normal course toward a foreclosure filing, according to a Trepp expert.

“A receiver is assigned to collect rents and allocate funds in the case of a defaulted loan to prevent the borrower from diverting cash from the property or the loan,” Joe McBride, director of research and applied data at Trepp, said.

Since LNR said the lender is performing pre-foreclosure due diligence, it is likely the mall is headed toward foreclosure, he added. McBride said the loan was due to mature in October 2017 and still has not been paid off.

The lender is likely to manage the property through its foreclosure and then try to sell it at the best possible price, McBride said.

The court filing alleges that the loan, taken out by Simon Property in 2007 and due Oct. 1, 2017, contains provisions that give MSCI the right to take possession of the mall property, and to receive and collect rents and other income in the event of a loan default. The complaint also says it has the right to appoint a receiver.

The complaint alleges that Bangor Mall, which still is owned by Simon, hasn’t paid rents and other monies to MSCI following the loan default last fall.

Still, the court filing isn’t clear about whether MSCI will try to foreclose on or sell the mall. It does say that nothing in the complaint or the effort to appoint a receiver means that MSCI is giving up its right to sell or foreclose on the mall.

MSCI asked the court to appoint The Woodmont Co., which bills itself as handling all aspects of retail, including asset management, to be the receiver. The complaint says Woodmont’s President and CEO Frederick Meno has had extensive experience managing and working as a receiver for retail shopping centers throughout the country.

Meno did not return multiple calls for comment from the BDN.

Even though the Superior Court has not yet responded to the claim, The Woodmont Co. already is advertising the Bangor Mall for lease. No price is listed.

John Mastin, one of the two leasing agents mentioned on Woodmont’s website flier for the Bangor Mall, said he is not involved in the leasing.

The other leasing agent, John Geddis, did not return calls seeking comment.

National mall woes

The Bangor Mall’s fortunes fell along with malls across America as consumers have preferred shopping online, at specialty stores and at other venues in the past few years.

The mall’s revenue reached highs topping $14 million from 2011 to 2015 at a time when it enjoyed occupancy rates of 98 percent.

In 2017, the mall’s revenue declined to $11.8 million and occupancy fell to 86 percent.

One of the tipping points came in the spring of 2017, when one of its four anchor stores, Macy’s, closed as part of a 63-store nationwide closure of that chain’s stores.

In the court document, MSCI still called the Bangor Mall a “significant retail enterprise.”

“To avoid the unintended consequences of an immediate shutdown of [the Bangor Mall property], this Court may exercise its equitable powers to appoint a receiver to protect the Property and the Personal Property Collateral,” the document reads.

Herz said the strong talk may simply be to get the judge to take the receiver filing seriously.

A potential foreclosure or sale isn’t necessarily a death knell for the Bangor Mall, Clancy of Trepp said in February.

Clancy said it isn’t clear what customers will experience if the mall is sold. If a buyer comes along and wants to redevelop and improve it, it could be a plus for shoppers. Another option is the mall could be sold for other purposes, such as being turned into a community college or call center.

The mall has seen some new tenants recently. Furniture Mattress & More, which leased the former Macy’s location at the mall in May from the Miami real estate developer that bought the retail space in January, plans to hold a grand opening July 21.

In the meantime, Murray still is reviewing the filings.

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