A $115 million loan for Gwinnett Place mall in Duluth was recently transferred to a special servicer, a company that oversees troubled loans, according to a report by Trepp, a real estate research firm.
Once a jewel of Gwinnett County, Gwinnett Place’s standing has fallen amid increased competition, changing demographics and a slow economic recovery.
Gwinnett Place is owned by Simon Property Group under an affiliate company. The loan was issued in May 2007 by Merrill Lynch and matures next June.
A special servicer can help alter terms of a loan, assist in refinancing debt or potentially find a buyer for the property if needed.
Payments are current, but a balloon payment on the balance of $115 million is due in June. The mall’s occupancy stood at 57 percent as of second quarter and rental rates have slipped in recent years, according to Trepp.
A corporate spokesman for Indianapolis-based Simon said the retail center operator does not comment on “financing matters.”
The Duluth shopping destination has struggled as traditional fashion retailers have left the market or relocated farther up I-85 to the Simon-owned Mall of Georgia, said Bob Wordes, chief operating officer of The Shopping Center Group.
“It was a thriving first-class mall. That’s not what it is today,” Wordes said, adding though he thinks Gwinnett Place remains viable.
The mall is anchored by Macy’s, Sears, J.C. Penney and Belk, according to the mall directory, and the mall added a new anchor in Mega Mart, a Korean discount retailer, last year.
Gwinnett’s retail vacancy was 10.9 percent as of the third quarter, according to Co-Star Group, compared to 10.2 percent across the metro area.
While special servicing could be the first step in a property being returned to the lender, Jim Bieri, a principal with real estate advisory Stokas Bieri in Detroit, said the move could also be a way to renegotiate with the lender. He said the mall could have fallen below its appraised value or cash-flow may have dipped to a level that violated covenants.
“Probably what happened is they made a loan at a time when rents would cover it and now the rents won’t cover it,” he said. “This center’s not worth what it was 10 years ago, clearly.”
Joe Piccolo, area general manager for Mall of Georgia and Gwinnett Place, said he was aware of the special servicing, but is not involved in the financing side. The mall will continue to operate as before, he said.
“We’re moving ahead full force,” Piccolo said.
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