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Real Estate - Commercial

Foreclosure Sale Scheduled For Independence Mall Property

By Cece Nunn, posted Oct 9, 2015
A public auction has been scheduled for Independence Mall in Wilmington this month, part of foreclosure proceedings initiated this spring after mall owner Centro Independence defaulted on a $110 million loan, according to court documents.

Almost 500,000 square feet of the mall at 3500 Oleander Drive, including the space occupied by JCPenney, serves as collateral for the loan. Belk, Sears and Dillard’s own their portions of the mall.

The sale, which would affect only those portions owned by Centro Independence, is scheduled for 11 a.m. Oct. 22 at the New Hanover County Courthouse, according to an amended notice of foreclosure sale filed in August at the courthouse. As of Thursday, that amended notice was the most recent document in the foreclosure file.

But the fact that a time and date have been set for the mall property sale doesn’t mean the sale will definitely take place. A public auction had been scheduled for May 29 at the courthouse before the foreclosure sale was amended, according to court documents.

Attempts to reach representatives of Centro Independence were not successful Thursday and Friday. 

Even if the sale does take place, mall shoppers might not see any difference.

Take JCPenney, for example: “We currently have no plans to close our JCPenney location at Independence Mall in Wilmington, NC,” wrote Joey Thomas of J.C. Penney Company Inc.’s media relations and corporate affairs division in an email Thursday. Thomas sent the email in reply to a question about whether the sale of the mall property would affect the store.

The same could be true for the stores outside of the collateral space at the Wilmington mall. Howard Riefs, director of corporate communications for Sears Holdings, said in an email, “We own our Sears store and as such the status of the loan or mall transaction does not affect our property. We will continue to have uninterrupted operations at our Sears store."

In a similar response, Belk spokeswoman Jessica Graham said in an email Friday that the sale does not impact that company's location at Indepdence Mall.

The potential sale of the mall could help offset the amount due on the mall’s loan, said Christopher Bushart, a Fitch analyst of commercial mortgage-backed securities, in a Greater Wilmington Business Journal article in July.

Centro Watt America REIT 10 Inc. owns the majority of the borrowing entity, Centro Independence, with Westfield Group entities, Hugh MacRae II and the Oleander Company holding smaller interests, according to a loan prospectus description provided by Trepp, a company that maintains a database of securitized mortgages for the commercial real estate and banking industries.

The fact that payment was 30 days overdue on the securitized J.P. Morgan loan was highlighted more than a year ago in a report by Trepp. The loan was then transferred to special servicer CWCapital Asset Management. This summer, Fitch Ratings downgraded the classes of a pool of loans that included Independence Mall’s, basing the change on estimated loss expectations.

The Independence Mall loan situation isn’t unique. In a Trepp report issued Tuesday, the company reported that loans on two smaller malls in the South, one in Alabama and another in Florida, have been sent to special servicing.

And for several years, the decline in popularity and the closing of malls throughout the United States has been documented in national news reports, though some experts say such reports are greatly exaggerated. In January, The New York Times published, "The economics (and nostalgia) of dead malls.” The article noted that about 80 percent of the nation’s 1,200 malls are “considered healthy,” with vacancy rates of 10 percent or less.

But other experts see a bleak future. About 15 percent of malls, according to data from Green Street Advisors, a real estate and REIT analytics firm, will close or become non-retail space in the next decade, a Business Insider story published last year said.

There’s no doubt the tenant mix has changed in recent years at indoor malls, said Tracy Meyer, chair of the marketing department at University of North Carolina Wilmington’s Cameron School of Business. Fewer national tenants are occupying storefronts inside malls like Independence. Meanwhile, outdoor shopping centers, where customers can park in front of stores and go in, seem to be among the locations of choice for shoppers, Meyer said.

“They are just much more popular today for retailers,” she said.

Meyer also said such centers are very popular among commercial developers and contractors as well.

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