Chapel Hills Mall to be sold or turned over to lender by summer
Chapel Hills Mall has been put on the market and will be turned over to its lender by summer if it is not sold by then, the owner of the Colorado Springs shopping center told stockholders Monday.
General Growth Properties Inc., a Chicago-based real estate investment trust that emerged from bankruptcy in November, said it has already transferred five malls to lenders and will sell or transfer Chapel Hills and seven others per agreements reached with lenders as part of an overall debt restructuring. The company had previously disclosed that it had to tell lenders within two days of leaving U.S. Bankruptcy Court protection whether it planned to retain what it called “special consideration properties.”
David Moss, general manager of the mall, said Chapel Hills “remains open for business,” but declined further comment in an e-mail message sent Tuesday.
General Growth owed $112.2 million on the mall at the end of 2010, according to a report filed Tuesday with the U.S. Securities and Exchange Commission. The loan was made in 2005 by LB-UBS Commercial Mortgage Trust 2006-C1; Miami-based LNR Partners is handling administrative details of the loan from the trust.
The 1.2 million-square-foot mall at 1710 Briargate Blvd. is anchored by Sears, Macy’s, Dillard’s, JCPenney, Burlington Coat Factory and a 15-screen Carmike theater and is the largest shopping center in southern Colorado. Kmart, Old Navy and the El Paso County Clerk and Recorder’s Office all have moved out of Chapel Hills in the past two years. Another major tenant, Borders, filed last month for U.S. Bankruptcy Court protection from its creditors, but its store in the mall remains open.
Paul Turner of Turner Commercial Research, which tracks commercial real estate vacancies and leasing in the Colorado Springs area, estimated the mall will eventually sell for 40 percent less than the amount General Growth had borrowed against it, or about $67 million.
“The lender likely will just keep it open and do business as usual until they find a buyer,” Turner said. “The owners of the Kmart space have been trying to sell it and have got nothing so far. You might have to split up the mall and sell it in parts to investors. Retail is transitioning away from malls.”
General Growth CEO Sandeep Mathrani said in a conference call with stock analysts that the company has sold eight shopping centers and three other properties for $84.7 million since he arrived in January and three other properties are under contract to sell for $154.8 million. Chapel Hills was not among the properties already sold; the three under contract were not identified. General Growth, the nation’s second-largest mall owner and operator with 169 malls in 43 states, also is planning to refinance much of the rest of its debt.
Finding a buyer for Chapel Hills Mall amid a struggling local economy may prove difficult, said Bob Taylor, an agent for Colorado Springs-based Walker Asset Management Realtors who had been general manager of The Citadel mall on the city’s east side from 1996 until 2006.
“Chapel Hills has been losing some pretty good tenants and that will make it more difficult to find somebody to buy it in a climate that is not helping retailers,” Taylor said. “Anyone who comes in and buys the mall will need to do upgrades to freshen it up and will need to bring in more tenants. The mall is in a good location, but retailers don’t want to go into malls any more. The thrust now is lifestyle centers because they are cheaper to build and maintain since they are not enclosed.”
The best hope for filling Chapel Hills Mall could be leasing space for use as office space, by community groups or as an entertainment venue, since “there aren’t enough retailers to go around for all of the space that is available in malls” both in the Springs and across the nation, Taylor said.
