Concord’s Steeplegate Mall owner could ‘hand the keys back,’ experts say
The owner of Steeplegate Mall could soon shed the Loudon Road property, experts said yesterday.
Rouse Properties released its financial information for the first quarter of 2014 on Monday, and their filing names the 480,000-square-foot Concord mall as a “special consideration property.”
That means the property “has a heightened probability of being conveyed to its lender absent substantive renegotiation,” the report states.
More simply, Rouse might get rid of Steeplegate Mall if it cannot renegotiate the terms of its mortgage.
The company could return the property to the loan provider instead of making a $47 million payment on that mortgage that is due in August. Shoppers and retailers could feel that dramatically if the lender closed the mall – or not at all, if a new owner took over its operations.
Hayley Cook, a spokeswoman for Rouse Properties, declined to comment beyond the financial filings, which note the mall has been moved to “special servicing.”
To analyst Paul Morgan, that means Rouse is looking for a way out on Steeplegate. Morgan is a managing director and senior equity analyst in New York City for the investment banking firm MLV Cos., and he was on a public earnings call with Rouse Properties on Monday.
“One option in these situations is to essentially hand the keys back to the lender,” Morgan said.
John Vogel Jr., an adjunct professor at Dartmouth College’s Tuck School of Business, said Rouse could also renegotiate its mortgage and keep the mall.
“Especially when a property goes downhill or loses value, it’s not unusual for a developer to then go back to his or her lender and say, ‘You know, I can give you back the keys if you want them because the property is no longer worth enough for me to want to keep managing it,’ ” Vogel said. “Or if (the lender is) willing to give me a break or a lower rate, then they’ll continue to manage it.”
If cash flow has slowed, Morgan said an owner will often negotiate with a lender to surrender a property rather than pay its mortgage.
“It’s relatively common,” he said.
If Rouse does hand over the mall, Morgan said the tenants and shoppers at Steeplegate might not notice at all. The lender could close the mall, but it could also sell to another company that would continue to operate it.
“It’s not something that generally would impact the shopper experience at the property,” Morgan said.
Steeplegate Mall was the second-largest taxpayer in Concord in 2012, behind only Wheelabrator Concord. City records show Steeplegate Mall has dropped nearly $30 million from its assessed property value, which is calculated in part using data on retail sales.
For 2013, the mall’s value is set at $52 million – a compromise that came out of a settlement agreement between Concord and Rouse, which has challenged the city’s assessment in the past several years. In 2012, the city assessed the property to be worth $65 million, but records from the board of assessors show Rouse claimed the mall to be worth only $37 million that year.
One of Rouse’s filings for the first quarter notes the company moved Steeplegate Mall to special servicing in April, but had not yet begun discussions about that loan.
“It’s that negotiation that will determine the ownership of the property,” Morgan said.
(Megan Doyle can be reached at 369-3321 or email@example.com or on Twitter @megan_e_doyle.)