The Bangor Mall’s real estate value has plummeted, according to a new appraisal, and there are indications that the property could be foreclosed upon and resold.
The new appraisal values the mall at $28.9 million. That’s down 77 percent from the mall’s $128 million value in 2007, when its primary owner, Simon Property Group of Indianapolis, took out an $80 million loan, using the mall as collateral.
The low appraisal is well under the loan amount, which could spur the lender to foreclose on the property, and then sell it to recoup some of its losses.
And while customers may not initially notice the impacts of the mall’s falling value, eventually their favorite stores may decide to leave, experts said.
But in brighter news for the mall, the vacant former Macy’s store was just sold at auction, signaling a new tenant may occupy the anchor space.
Simon defaulted on the loan in October. It was then transferred to LNR, a loan servicer that specializes in troubled debt, which had the appraisal done on Oct. 10. The information was released in a Dec. 15 research note published by Trepp, a data analysis firm, and obtained by the Bangor Daily News.
“It was not such a surprise that the mall had such a low value,” said Edward Dittmer, senior vice president at Morningstar Credit Ratings. “But I was surprised it was this early in the cycle [of LNR reviewing the loan].” Appraisers estimate mall sales going forward, not whether its historic sales are sustainable, he added.
Additionally, LNR classified the mall as being in foreclosure in data collected by Trepp. Simon didn’t make its loan payment in October, which Dittmer said could have hastened the loan’s classification.
No foreclosure paperwork on the mall has been filed with the Penobscot County Registry of Deeds nor the state’s district or superior courts, according to clerks contacted by the Bangor Daily News.
Simon spokesman Les Morris said the company does not comment on details of its properties. It owns around 200 malls nationwide.
“This is not good news,” Dittmer said. “If the lender intends to go through foreclosure, it likely means Simon doesn’t want to own the mall and at sometime it will taken back by LNR and resold.”
Under the way the loan is structured, Simon would turn over the mall to LNR and walk away clean.
Mall shoppers likely won’t see any changes over the coming months, although if another anchor tenant departs, the stores around it may either leave or renegotiate their leases, he said.
Morningstar had estimated the mall’s value at as high as $66.6 million and as low as $17 million three months ago. The loan is against 536,299 square feet of the mall.
But there may be good news if the mall eventually sells for around the $29 million appraised value.
“Someone else could buy the property at around $30 million, and that means the rents for tenants could be substantially lower,” said Orest Mandzy, managing editor of Commercial RealEstate Direct, an industry publication. “The foreclosure classification is just the next step in a lengthy process that could result in the recapitalization [debt restructuring] of the mall.”
Other potential good news is the sale, at auction, of the mall’s remaining 143,142 square feet on two stories. It was formerly owned by the real estate arm of Macy’s, an anchor tenant that pulled out last spring, spurring financial experts to begin scrutinizing the mall’s viability.
The Macy’s property sale was handled by online auctioneer Ten-X on Dec. 13, and the winning bid should close within the next 30 days, said Daniel Greenstein, a partner at CBRE/The Boulos Company, which had been handling the sale but got no takers.
A Ten-X spokesperson said the name of the winning bidder and the price are protected by confidentiality until the deal closes.
The mall’s other two anchors are J.C. Penney and Sears, whose leases are up for renewal within the next two years, and Dick’s Sporting Goods.
The mall is expected to have $7.1 million in cash flow, or the money it makes, this year, down from $8.6 million in 2016. The occupancy rate also has fallen from 89 percent in 2016 to 86 percent as of the first quarter of 2017.
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