The Florence Mall has changed ownership after Brookfield Properties resolved a $90 million loan default by handing the property over to its lenders.
It’s the second local mall to default on its debt in the wake of a pandemic that accelerated store closures and kept shoppers from venturing outdoors. And it signals a rapid decline for what had been considered one of the region’s strongest malls, with an occupancy rate of 87.9% as recently as last March, according to Brookfield's most recent annual report.
Brookfield did not immediately respond to an email seeking comment. Florence Mall general manager Jerry McClurg will continue to run the property under a management agreement with the commercial real estate firm JLL.
"We do not expect any operational interruptions to the mall," McClurg said. "JLL is the largest third-party manager of malls and shopping centers across the country. Our firm has relationships with national, regional and local retailers, which enables us to find the right tenant mix for the mall. We’re excited for the future here.”
Florence Mayor Diane Whalen said she was encouraged by the retention of the mall’s existing management team by lenders. She thinks the property can recover.
“It’s a very visible piece of real estate,” Whalen said. “It has nearly 200,000 cars a day that pass it where 75 and 71 are combined. And it’s not going to be this giant empty shell. I think the redevelopment opportunities are huge, whatever they might be.”
She added: “I think everybody needs to understand that business models change, and this mall opened in 1976. So, what business hasn’t had to adapt? I think what we see is an adapt-or-die situation, and I think they’re working on adapting and the mall itself (will) continue to be viable.”
It’s been a rough year for local malls, which are coping with the double whammy of home-bound consumers spending more money online and traditional brick-and-mortar retailers shuttering stores.
Tri-County Mall took a major blow last month when Macy’s Inc. announced it would lose its Tri-County store this spring.
Eastgate Mall, which fell into delinquency on a $32 million loan last April, is now tied up in bankruptcy. Eastgate’s owner, CBL Properties in Chattanooga, Tenn., filed for bankruptcy protection in November, hoping to restructure debt on Eastgate and 106 other properties.
Brookfield Properties opted to resolve its delinquent loan by handing over the deed to Florence Mall on New Year’s Day, according to a regulatory filing to bond holders made public by the U.S. Securities and Exchange Commission on Jan. 29.
Both Eastgate and Florence were financed by commercial mortgage-backed securities deals, or CMBS loans, in which banks sell a bundle of commercial loans to bond investors. Because they make money as loans are repaid, the investors get regular updates on problem loans from companies hired to service the debt.
The filings for Florence Mall show the property fell into default last June after having “severe collection issues” from tenants.
Recent social media speculation about its future prompted a Jan. 25 Facebook post: “Florence Mall can confirm we are not closing,” it said. “We are open for all your shopping and dining needs.”