The troubled Bangor Mall is headed for foreclosure March 7, at which point its lender will take over with the aim of selling the mall. Credit: Lori Valigra

The beleaguered Bangor Mall looks set for major changes after a lender said it has begun taking steps toward a foreclosure to be completed by March 7.

If the foreclosure is concluded, experts say the lender will likely put the mall up for sale.

A New York research company that tracks commercial loans nationwide said there’s a market for brick-and-mortar malls, but cautioned that the mall’s customers could see anything from a fixed-up property to a downtrodden “dead man walking” shopping center.

“There are people out there looking for distressed malls,” said Manus Clancy, senior managing director of data research at Trepp, the New York-based commercial real estate data company that publishes regular reports on loans. “Someone always buys them for some amount [even if it is very low].”

Trepp published comments from LNR, a Miami-based company that handles troubled loans, which issued its monthly update on the mall Thursday. LNR is handling that loan and the foreclosure steps on behalf of the lender. Mall owner Simon Property Group of Indianapolis defaulted on an $80 million loan taken out against the mall last Oct. 1.

LNR is now conducting due diligence on the property to check if there are environmental or health issues or liens, said Clancy. A series of sewer liens by the city of Bangor have been paid over the past few months.

Clancy said the March 7 deadline may slip for reasons similar to a house sale closing being delayed.

“While it is slated for March 7, it may not happen then if the due diligence isn’t completed or if Simon changes its mind about handing over the property to the lender,“ he said. Parties sometimes change their mind at the last minute, he added, and Simon could do that before all details of the foreclosure are completed.

LNR and Simon would not comment on the status of the mall.

However, in the Jan. 16 Trepp report, LNR noted that Simon “is not interested in modifying the loan.” Simon could have, for example, asked the lender to extend the life of the loan, decrease the outstanding balance on the loan or decrease payments.

LNR already has formed a Maine-based company to handle the mall’s property for it and the loan trustees, according to documents filed Jan. 19 with the Penobscot County Registry of Deeds. The company is called MSCI 2007-IQ16 Stillwater Avenue LLC.

No foreclosure notice has been filed yet with the Superior Court in Bangor or with the Penobscot County Registry of Deeds. A court clerk said foreclosures typically are filed with the court first. The court then issues a clerk certificate that is sent to the registry.

If the foreclosure is completed, the trustees will own the mall, and LNR will work to prepare the mall for sale, according to one expert.

“LNR will continue to manage the asset [Bangor Mall] and try to salvage some value,” said Steve Jellinek, vice president at Morningstar Credit Ratings, which rates loans like Simon’s.

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.

However, it it becomes what he called a “dead mall walking,” with more and more tenants leaving and fewer shoppers coming in, customers may feel unsafe, and the mall could spiral downward.

Another option is that the mall could be sold for other purposes, such as being turned into a community college or call center.

In a separate move, Simon has asked the city to drastically lower the appraised value of the mall, which would halve the $1.4 million in property taxes that it pays for this tax year.

Jellinek said Simon is responsible for property taxes until the foreclosure is completed.

The Bangor Mall area makes up almost half of the 6.4 million square feet of retail space in Greater Bangor, according to data compiled by Epstein Commercial Real Estate brokers..

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