The owner of Boulevard Mall slashed the estimated value of the region's second-largest enclosed mall by 44 percent, putting it well below the $92.4 million balance remaining on a loan that will come due in three months.
Cleveland-based Forest City Enterprises disclosed in a quarterly filing with the Securities and Exchange Commission that it marked down the value of the Maple Road mall by $52.5 million. That reflects its expectations of lower cash flows and income from the property, as well as its previously announced intention to sell it. The company put the mall up for sale in July as part of a new strategy to pay off existing debt and concentrate its investments and property management on major markets like New York City and Washington.
The mall is collateral for a real estate loan from Goldman Sachs, which makes up just under 4 percent of an investment security sold on Wall Street by Greenwich Capital. So the company is required to divulge such information under federal law. The Nov. 3 filing did not give any further reasons for the decline in value. However, it's still appraised at $159.5 million.
In its annual report filed in February, Forest City valued Boulevard Mall at slightly over $118 million, including land and buildings. But with its newest report, that's now down to $65.6 million, or 29 percent less than the loan it backs.
The filing came as the commercial mortgage itself was sent by Wells Fargo & Co. to a "special servicer" for management, in anticipation that Forest City would default on it and trigger a foreclosure, according to a notice issued by debt analysis firm Fitch Ratings. Special servicers are responsible for handling all aspects of a troubled loan, from working with the borrower and continuing to collect on it to initiating and completing a seizure of the property to avoid or recover losses for investors.
The 10-year loan, current as of October, is due in full by Feb. 6, under the maturity terms of the original loan. LNR Partners of Miami Beach is now in charge of the debt.
Built in 1962 and previously owned by Benchmark Group and Lawrence Dautch's Niasher Realty Inc., Boulevard has 962,000 square feet of total space, including 385,000 square feet of leasable space. It is 87 percent occupied, the lowest in 10 years, according to commercial mortgage data research firm Trepp LLC. It's anchored by JCPenney, Macy's, Sears, Michael's, Bed Bath & Beyond, and a new Dick's Sporting Goods store, which replaced its former food court.
But the mall has seen declining fortunes, as several national tenants have left. According to data from Trepp, its net operating income has fallen from $12.4 million in 2005 to $8.6 million, while net cash flow is down from $9.6 million in 2007 to $7.9 million now.
Forest City acquired a 50 percent ownership in the mall in 1996, and then bought out its partners in December 2014 for $9 million.