Owner defaults on loan for Steeplegate Mall

Last modified: Wednesday, August 06, 2014
The owner of Steeplegate Mall has defaulted on the property’s loan.

Rouse Properties did not make a $47 million loan payment due on the Concord mall at the beginning of this month. That default was announced yesterday in the company’s second-quarter earnings report.

The report notes that Rouse is working to transfer the Steeplegate deed to its mortgage lender. More simply, the company is in the process of giving the keys back to the bank.

Carlos Baia, deputy city manager for development, said Rouse’s actions don’t necessarily mean the mall’s end.

“The chances of the mall closing are very, very slim,” Baia said.

Instead, the lender could take the mall, restructure the debt and seek a buyer.

“In theory, the buyer would buy the mall at a reduced price,” Baia said.

Bill Norton, president of Norton Asset Management Inc., said Rouse is shedding a mortgage that is much higher than the value of the property.

“It’s not worth $47 million,” Norton said. “So just like a house, if you get way upside down, you just toss the keys.”

The 480,000-square-foot Concord mall is only 65 percent occupied, according to yesterday’s report.

“Nobody wants that Steeplegate Mall because its vacancies are high and the stores there are underperforming. . . . In hindsight, it got too big,” Norton said. “It’s more square footage than the Concord market can support.”

Norton agreed the mortgage lender will likely sell the mall at a much lower price – and as soon as possible.

“Believe me, that lender doesn’t want to own that mall,” Norton said.

Requests for comment from the mall’s management and a Rouse spokesperson were not returned. Steeplegate Mall opened in 1990 and is one of 34 malls owned by Rouse. The company acquired the Loudon Road property in 2001, when General Growth Properties spun off 30 shopping malls that were described as not among their top-performing sites.

The mall was the second-largest taxpayer in Concord in 2012, behind only Wheelabrator Concord. Over six years, 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.

On an earnings call yesterday, President and CEO Andrew Silberfein did not elaborate on Steeplegate. He did mention, however, significant cosmetic improvements to other malls owned by Rouse and the purchase of a new mall in Alabama.

“We continue to see a significant pipeline of potential acquisitions,” he said.

As Rouse appears to abandon Steeplegate, Baia said a new owner could be an improvement for Concord.

“There could be more flexibility on the part of the ownership of the mall to pursue different leasing strategies and different improvements to the mall,” Baia said.

“It would bring new vitality to that infrastructure,” he added.

(Megan Doyle can be reached at 369-3321 or mdoyle@cmonitor.com or on Twitter @megan_e_doyle.)