Lender seeks Park Plaza ownership

Park Plaza mall in Little Rock is shown in this 2013 file photo.
Park Plaza mall in Little Rock is shown in this 2013 file photo.

The owner of Park Plaza mall has defaulted on a nearly $100 million loan on the property, leading its lender to seek ownership and have a receiver appointed with the intention to sell it, according to a lawsuit filed in Pulaski County circuit court.

Deutsche Bank Trust Company Americas filed the lawsuit against Park Plaza Mall CMBS LLC, which is an entity tied to CBL Properties Inc. of Chattanooga, Tenn., which owns and operates more than 100 malls and shopping centers in 26 states.

Deutsche Bank asked Circuit Judge Alice Gray to immediately appoint as receiver Frederick J. Meno, a Fort Worth, Texas, real estate company executive, a move the bank said was because of the mall owner's "decision to close and abandon the property if a receiver is not soon appointed."

Meno is "ready and willing to serve as receiver to take control and possession of [Park Plaza] and account for the rents and oversee and manage the property," as well as pay "necessary expenses" to maintain the property, lease available space, market the property and, ultimately sell it, with "permission from the court."

The mall owner didn't oppose the appointment of the receiver, according to the court papers.

The action stems from a $99.4 million loan the original lender, Wells Fargo Bank, made to Park Plaza in March 2011. The loan was assigned to Deutsche in July the same year, according to the lawsuit, which was first reported by Arkansas Business.

Park Plaza defaulted on the loan when it failed to make a payment due almost a year ago, in April 2020. Deutsche Bank sent a default notice to Park Plaza on April 7, 2020.

Park Plaza has since notified the bank that "the performance of the property does not permit [Park Plaza] to maintain and operate the property and to pay debt service on the loan, that there is no additional source of capital to fund debt service and operations and that [Park Plaza] will close the mall if [Deutsche Bank] does not permit operating expenses for the property to be paid from rents ahead of debt service payments," the lawsuit says.

The lawsuit came four months after CBL Properties filed for its long-expected Chapter 11 bankruptcy to restructure debt and eliminate $1.5 billion from its balance sheet.

CBL had said earlier in the year that it had entered into a restructuring agreement with a group of lenders, a move the company said was designed to strengthen its balance sheet and keep open its 107 malls, plazas and shopping centers.

At the time of the bankruptcy filing in November, CBL said the move would give the company a chance to continue operating while reorganizing its finances and business. It listed estimated assets of $1 billion to $10 billion, and estimated liabilities in the same range.

The move is the latest sign that the retail landscape continues to be roiled by consumer migration to e-commerce. The yearlong covid-19 pandemic that forced malls to close or reduce hours was another hurdle for Park Plaza and other malls.

CBL acquired Park Plaza in 2004 for $77.5 million.

The mall covers 547,000 square feet, including two Dillard's locations that were not part of the sale. Dillard's owns its stores at the site.

The Park Plaza site was developed in 1959 and eventually was overhauled and became an enclosed regional mall in 1988.

The foreclosure suit comes three months after Park Plaza went to circuit court to have its assessed property value reduced from $63.6 million to $20.9 million, an amount Park Plaza said was the "real and true market value" of the property. The future of the litigation is unclear in light of the foreclosure lawsuit.

In the Little Rock area, three other shopping center properties changed hands, at discounted prices, before the pandemic.

The high-end Promenade at Chenal in west Little Rock changed hands for $10 in cash and other unspecified considerations "in lieu of foreclosure" in 2019, according to real estate documents maintained online by the Pulaski County clerk's office.

The Promenade opened in 2008 with a $79 million price tag. The county assessor values the property at $38.4 million.

Shackleford Crossings, also in west Little Rock, sold in December 2019 for $10.5 million, a quarter of the $42 million price tag when it last sold in 2011.

And in January, a New York-based mall operator specializing in distressed properties acquired the Outlets of Little Rock for $10 million, a fraction of the $60 million value at which the Pulaski County assessor's office had assessed the 30-acre property near the Interstate 30/Interstate 430 interchange.

The buyer was Little Rock Outlets Realty Holding LLC, which is led by Mehran Kohansieh, also known as Mike Kohan. He leads the Kohan Retail Investment Group, which is based in Great Neck, N.Y., and has a portfolio of 36 malls around the United States.

The seller was NED Little Rock LLC, an arm of New England Development, a Boston-based company that developed Outlets of Little Rock. It boasts about 55 tenants, down from the 75 it had shortly after it opened five years ago.

Malls around the state aren't immune from the challenging retail environment.

About 13 months before the Outlets acquisition, another limited liability company tied to Kohan acquired Central Mall in Texarkana, Texas. The Bowie [County] Central Appraisal District values the property at $10.4 million, less than half the $23.7 million the district said it was worth in 2017.

Another Great Neck, N.Y., real estate investment company, Mason Asset Management, acquired Central Mall in Fort Smith for $17 million, also in December 2019. The property changed hands almost 15 years earlier for $70.5 million.

And the owner of the Mall at Turtle Creek in Jonesboro is struggling, according to an industry publication. A limited liability company tied to Brookfield Properties purchased the mall for $88.7 million in 2013.

The Real Deal, an online real estate publication, reported in January that 10 Brookfield malls were at risk of being turned over to their lenders, based on an an analysis of mortgage data and media reports. The properties are backed by a combined $1.2 billion in loans, according to the Real Deal.

The Mall at Turtle Creek, which incurred significant damage from a tornado about a year ago, wasn't among the 10 malls listed.

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