The halting economic recovery and changing consumer habits have forced a change of ownership at another metro Atlanta mall.
Southlake Mall in Clayton County, an area hard hit by the home foreclosure crisis, was itself taken back in foreclosure on behalf of the lender, according to a real estate professional who was at the county courthouse Tuesday when the proceeding was announced.
Neither the mall’s former owner nor the company overseeing the mall would confirm or deny the foreclosure, though it was advertised in advance. The person at the courthouse didn’t want to be identified to avoid revealing business interests.
Foreclosure likely will not immediately change operations of the mall, whose vacancy rate approached 40 percent at the end of 2012, according to one real estate firm. A new owner will likely attempt to revitalize the center, located in Morrow just off I-75.
Southlake is the latest metro shopping center in financial trouble. Others include Gwinnett Place Mall, foreclosed last year, and DeKalb County’s Mall at Stonecrest, whose troubled loan was referred to a so-called “special servicer” last month.
The economy, online retailing and competition from open-air centers have forced malls to evolve or face financial collapse. Since 2008, there have been more than 70 mall foreclosures in the U.S.
Southlake, which opened in 1976, has struggled to keep tenants for years.
But as with the housing market, location rules. Malls in more affluent, stable areas such as Lenox Square, Phipps Plaza and Perimeter Mall, have tended to be stronger than those where home foreclosures and job losses have hit hard, or those already weakened by newer, larger centers in the same market.
The amount of vacant or available for lease space at Southlake Mall was 38.7 percent at the end of fourth quarter 2012, according to a spokeswoman for real estate research firm CoStar Group.
The vacancy rate at malls across metro Atlanta, by contrast, dropped to 8.1 percent at the end of last year, from 8.8 percent at the end of September.
Last summer, a loan backed by a portion of Southlake Mall went to a special servicer, a workout firm that tries to fix troubled commercial mortgages.
Messages left for Southlake’s general manager were not immediately returned. Spokesmen for General Growth Properties, Southlake’s former owner, and the servicer declined to comment.
Jim Bieri, a retail real estate expert with Stokas Bieri in Detroit, said the property needs a strong management and ownership group willing to commit the resources to lure new top flight brands and traffic that is avoiding the complex to shop at other nearby centers.
That’s not easy when fewer retailers are expanding.
“There’s just less of a demand for these malls and there are other great options in metro Atlanta,” Bieri said.
Malls in Macon, Gainesville and Rome were foreclosed on in recent years and remain open.
Union Station Mall in south Fulton County was foreclosed after years of distress and currently stands vacant.
The loan on Sugarloaf Mills, formerly known as Discover Mills, fell into trouble but the mortgage was restructured, preventing a foreclosure.
General Growth Properties emerged from bankruptcy in 2010 and has shed underperforming shopping centers and debt, putting its attention on stronger malls. It owns several Georgia malls, including Perimeter and Cumberland malls.
Southlake Mall is more than 1 million square feet in total, about half the size of Perimeter Mall.
The foreclosure involves the main corridors, food court and other common areas - the spaces that make it a mall - but not anchor tenants Macy’s and Sears. Representatives for those retailers said the foreclosure does not affect their stores.
In the common area alone, more than half of the tenant leases expire within two years, according real estate data firm Trepp.
Southlake was dealt a heavy blow when J.C.Penney’s shut its store there in 2011.
Many mall operators have recruited unique or first-to-market retailers or put in trendy restaurants and improved walkability to entice shoppers.
Simon Property Group renovated Phipps Plaza, adding the Legoland attraction, for instance, while Atlantic Station’s controlling interests overhauled its roster of restaurants and retailers.