N.Y. firm acquired Concord Mall before foreclosure
WILMINGTON – While reports about the Concord Mall’s change in ownership earlier this month painted a picture of “business as usual,” the reality is a bit bleaker, according to a Delaware Business Times review of county land records and media reports.
The mall wasn’t so much sold as forfeited, as its owner, Concord Mall LP – owned and operated by the well-known Acierno family of developers – faced the prospect of foreclosure on the long-running retail destination space near the Pennsylvania border.
The new owner is Namdar Realty Group, a commercial real estate investment firm based in Long Island, N.Y., that has been moving with breakneck speed to snap up troubled malls in America, often leaving them to fend for themselves without significant reinvestments or renovations, according to published reports.
The case represents a quiet end for Concord Mall LP’s tenure, as well as that of its more well-known management company Allied Properties, as owner of the Concord Mall, but its representative of changes taking place around the country in the retail industry.
While officials at Allied Properties have yet to respond to DBT questions about the transfer, it could represent a change in direction for the family-owned company. It primarily owns open-air retail centers that are seeing growth, such as the Christiana Fashion Center near the Christiana Mall.
Concord Mall LP, under earlier affiliates, signed a 20-year, $50 million mortgage when the mall was purchased for a reported $80 million in May 2000. At the time, malls were still go-to destinations for department stores, boutique shops and dining. Anyone who remembers Concord Mall at the turn of the millennium can recall its bustling hallways and packed storefronts most nights.
Six years later, the mall’s owners subsequently received a second mortgage worth $6 million in August 2006, according to land records. At that time, the mall’s owner had paid less than $500,000 of the original loan’s principal, according to mortgage records. The terms of the original loan remained unchanged though: a maturity date of June 1, 2020, with an interest rate of 8.07%.
For more than a decade, operations at the mall continued quietly until 2017, when Jim Oeste, vice president of real estate for Allied Properties, told Delaware Public Media that his company was “reimagining the mall’s format, tenant mix, and overall look and energy.” A year later, a redevelopment plan for the mall completed by MSC Retail, a real estate services firm with a Philadelphia office, appeared online and showed plans for a modern exterior renovation. The plans never progressed.
In August 2019, a subsidiary entity of Namdar negotiated the purchase of the Concord Mall’s mortgage from its former holder, John Hancock Life Insurance Co. How much Namdar paid to take on the Concord Mall’s remaining debt and how much Concord Mall LP still owed is unclear, but such transactions – known in industry terms as purchasing of non-performing mortgage notes – typically come at a steep discount. Mortgage-holders don’t want to become property owners or landlords through foreclosure, and often write off losses to transfer the debt to someone else.
Amid the transfer, Namdar brought Israel Discount Bank of New York into the fold, with Namdar assigning it as its lender for a $16.5 million mortgage on the same day that Concord Mall LP’s mortgage was satisfied. That value was less than the mall’s more than $18 million assessment in its 2019 New Castle County tax bill.
When exactly the mall ran into financial issues is also not clear from a review of public records, however, its investments preceded the 2008 recession and the rise in e-commerce that has hit retail hard in the last decade.
Just this month, two more stores – longtime tenant AB Sports, a sports memorabilia store, and RetroFitness, a gym leasing 13,000 square feet in the rear of the mall – have announced their closures. Their closures mean that more than 30% of total storefronts and 10.6% of total square feet at the mall are vacant, more than the already troubling national statistics. According to a report from Reis Moody Analytics earlier this month, U.S. mall vacancies are at their highest levels in 20 years of study at 9.7% of total square feet.
Barbara Denham, senior economist at REIS Moody’s Analytics, said that retail isn’t dead in shopping malls, but the market has become much more difficult.
“It’s kind of a good-mall, bad-mall story,” she said. “There are good malls that are doing very well, and there are some that are really struggling to stay afloat. Ever quarter it seems that we see that gap between the haves and have-nots grow a bit wider.”
Denham said that malls that are succeeding are investing in amenities like grocery stores or entertainment options like move theaters or Ferris wheels in order to drive more foot traffic.
The prospect of losing another anchor tenant in Sears, the last surviving location of the troubled retailer in the state, was also apparently weighing on the Concord Mall’s owners. In 2018, it filed notices in the New York bankruptcy case of Sears’ former owner, Sears Holding Corp., seeking more info on the plans of the parent company to close stores.
With a June deadline to settle its mortgage and a declining revenue picture, the mall’s owners apparently decided to let it go. On Jan. 15, Concord Mall LP President Michael Acierno signed a deed in lieu of foreclosure, turning over the more than 800,000-square-foot shopping center for $10 rather than face the prospect of a public foreclosure process.
In its press release announcing its exit from the mall, Allied Properties was careful to say that ownership had been “transferred” rather than sold.
Such turnovers of struggling malls have become more common in the country over the past few years, as landlords seek to get out from under failing investments rather than try to restructure their debt. Even giants in mall ownership, like Simon Property Group and Pennsylvania Real Estate Investment Trust (PREIT), have either transferred properties in deeds lieu of foreclosure or allowed them to fall into the public foreclosure process altogether in recent years.
Namdar along with its affiliated property management company, Mason Asset Management, is among those capitalizing on the troubles of shopping malls by buying up dozens of such properties around the U.S. Through its acquisition strategy, the duo has grown, often earning the ire of locals in their markets with uneven attention in reinvestment or redevelopment of the properties.
In their own acquisition criteria materials, Mason says that it is “aggressively looking to acquire malls and shopping centers throughout the U.S.,” declaring “no center is too small and no deal is too big.”
Igal Namdar and his wife’s cousin, Elliot Nassim, the respective founders of Namdar and Mason, started buying up shopping malls in 2012, according to a 2018 Reuters report on the companies. Today they are one of the Top 20 largest mall owners in America, currently counting 137 malls or shopping centers in its portfolio totaling more than 30 million square feet of retail space.
Their growing portfolio has also led to increasing criticisms from the local communities left in the wake of the sales though. Newspapers have reported on citations and lawsuits against the firms in New York and Florida over failing to maintain their malls. Reuters reported that sources told them that Mason’s and Namdar’s strategy was to “invest as little as possible on many of their properties, adding the aim is to hold the assets, not redevelop them.”
Igal Namdar downplayed those concerns to Reuters, saying the companies addressed issues and highlighted a high retention rate for tenants as evidence. He also said that the companies were targeting “better quality assets” to improve their overall portfolio.
After DBT published this story, Nassim emailed a statement regarding the companies’ acquisition of the Concord Mall, saying, “We were excited to learn of the opportunity with the Concord Mall, and our decision to move forward with the purchase was a direct reflection of our evaluation of the property’s potential.”
“We look forward to bolstering the tenancy in place with new opportunities, and it is our goal to continue to add value by further leasing and developing the site. As it relates to the specifics for those plans, we are still exploring all our options,” he said. “It is our goal to bring in new and alternative tenants – repositioning the property and allowing the surrounding neighborhood to benefit. As a company, we always strive to create efficient retail hubs that generate revenue and reinvigorate the communities within which we operate.”
By Jacob Owens