Liberty Center debt now classified as 'troubled'

New York lender takes $15M loan loss reserve
Posted at 10:13 AM, Feb 28, 2019
and last updated 2019-02-28 12:35:10-05

The Liberty Center retail project is still causing grief for its New York lender.

Apollo Commercial Real Estate Finance Inc. has set aside a $15 million loan loss provision on the property, alerting investors that it’s unlikely to collect the full $169 million principal balance due on its 2014 construction loan. Apollo CEO Stuart Rothstein has been fretting over low retail occupancy rates at the Butler County project since the summer of 2017.

But this is the first time the company has classified its Liberty Center loan as “troubled debt restructuring.”

“There is still a lot of work to be done on this asset,” Apollo CEO Stuart Rothstein told analysts in a Feb. 14 earnings call. “It is covering debt service. It is a real center. But low-80s occupancy is not where we want it to be long-term.”

Apollo loaned the project $165 million in November, 2014. In its 2015 annual report to investors, it said the floating-rate mortgage would be paid off by May, 2018. The loan was extended last year with a new maturity date of September, 2020. At the end of last year, Apollo reclassified the loan as “impaired” with a “loss likely.” Liberty Center is paying interest only on its debt, according to Apollo’s filings with the Securities and Exchange Commission.

“We think there are strategies to certainly increase the occupancy,” Rothstein told investors. "We think there are other strategies vis-à-vis the size of the parcel and what you may or may not be able to do with outparcels or other strategies to continue to add value to the site. But in terms of the sort of analysis we go through on a quarterly basis, from a pure sort of books and records perspective, it was the appropriate time to take a reserve.”

After the loan was extended last year, Apollo forced a change in management. In September, the project’s developer, Columbus-based Steiner + Associates, ceded control of the retail portion of Liberty Center to Jones Lang LaSalle, a commercial real estate firm that declined to comment.

Since then, The Gap and Charlotte Russe have announced store closures at Liberty Center. An indoor skydiving attraction announced in December, 2017 is now under construction, with an opening expected in late spring.

In January, Vice President Giorgio Karras told the Journal News JLL was negotiating a lease for a new-to-market, family entertainment attraction that would fill 40,000 square feet in the Foundry section of Liberty Center. He also said JLL was negotiating a lease for a retail tenant to replace The Gap.