DULUTH, Ga. -- An affiliate of mortgage servicer C-III Asset Management foreclosed on Duluth's Gwinnett Place mall last month for $39 million - 66 percent less than the original value of the loan.
The transaction closed Aug. 7, according to Gwinnett County records.
That's quite a haircut for C-III and the bondholders whose interests it represents. The original value of the debt, originated in 2007 by Merrill Lynch, was $115 million, according to Trepp LLC, a New York firm that tracks the performance of commercial mortgage-backed securities. The mortgage was formerly held by Simon Property Group, according to Databank Inc.
The foreclosure involved 27 acres of the Gwinnett Place mall campus, including about 346,295 square feet of retail, Databank said. The entire mall is more than 60 acres, including about 1.2 million square feet of retail space.
That plummeting value reflects the unpleasant realities suburban mall and shopping center owners face as vacancy remains stubbornly high, especially compared to some intown Atlanta markets that have started to rebound.
Some of the region's best-known real estate companies are selling off suburban assets and focusing on the acquisition of urban properties and redevelopment sites.
Cousins Properties Inc. has decided to sell its suburban outdoor malls, or lifestyle centers, in Georgia: the 524,000-square foot Avenue Forsyth near Cumming and the 322,000-square-tood Avenue Webb Gin near Snellville.
Its moves are not limited to Georgia.
Earlier this year it sold a 511,000-square-foot lifestyle center in Memphis for $55 million.
Cousins CEO Larry Gellerstedt recently told Atlanta Business Chronicle, "One of the most stressed parts of the retail business has been the lifestyle business. It got overbuilt."
Metro Atlanta has been in the crosshairs of the worst downturn commercial real estate has endured in more than two decades.
The region has 3,245 shopping centers amounting to 142 million square feet of retail space, Scott Amoson, director of research at Colliers International-Atlanta, recently told the Chronicle. It's suburban centers probably hurting the most because many were developed near planned housing projects that stalled amid the recession.
Gwinnett Place has been struggling for years, weakened by nearby competition from other suburban malls, which were built in the late 90s and early 2000s and began vying for the same stores. Gwinnett Place was developed in the 80s.
Across metro Atlanta, 54 retail properties were at least 90 delinquent on their loans, Trepp said. Of those, 20 have been foreclosed upon. The properties secured a combined $560 million worth of commercial mortgages.
McKinley, a real estate company based in Michigan, is working with C-III to decide the next step for Gwinnett Place.
The next owner of the property will have tough choices to make about the retail heart of the mall that includes Belk, formerly Parisian.
McKinley representatives are slated to meet as early as this week with the leadership of the Gwinnett Place Community District, or CID.
The mall is still viewed as Gwinnett's "central business district," Joe Allen, executive director of the Gwinnett Place CID has said, and he believes it can once again be successful.