NEW LEASE ON LIFE
Ailing Pittsburgh Mills mall sold to New York-based company for $11 million
As the Galleria at Pittsburgh Mills shed stores and foot traffic over the last dozen years, the struggling mall attracted the attention of a new owner.
The Pittsburgh Mills was sold for $11.35 million to Mason Asset Management of Long Island, N.Y. — almost twice its current assessed value of $6.48 million.
The 1.1 million-square-feet enclosed mall along Route 28 in Frazer has faced numerous challenges since it opened in 2005, not the least of which was its foreclosure in 2015 by Wells Fargo Bank. The mall was auctioned off in January 2017, and the bank took possession of the property on behalf of the lenders in exchange for $100.
The new owner, Mason Asset Management, is affiliated with Namdar Realty Group, also of Long Island. The privately held firm owns 120 retail properties, mostly in the eastern half of the country.
The Pittsburgh Mills property adds to the firm’s portfolio in Western Pennsylvania. Last year, it bought Beaver Valley Mall, near Shell Chemical’s ethane cracker under construction, for $24.2 million. Namdar later subdivided parts of the property and sold them.
Other nearby properties owned by Namdar include Big Lots Center in West Mifflin; Uniontown Mall in Uniontown, and Weirton Plaza in Weirton, W.Va.
Namdar directed calls to Mason Asset Management, its leasing office. Mason did not return calls for comment.
The sale of the mall was welcomed by Frazer officials. “Our board is pleased that it’s moved forward and out of foreclosure status,” said Township Supervisor Lori Ziencik, who also is the township’s secretary/treasurer.
“We’re hopeful now that a company has bought it instead of the bank that they can turn it around and get some new leases,” Ms. Ziencik said.
In recent years, Namdar has been “very active in the distressed mall space,” said Edward Dittmer, senior vice president of Morningstar Credit Ratings. Namdar also owns other shopping centers in Pennsylvania, including Nittany Mall in State College and North Hanover Mall in Hanover.
“Right now they continue to operate some of those malls that have been in various stages of distress,” he said. “It’s hard to say
what their end game is. I haven’t seen massive redevelopments at a mall they’ve acquired just yet.”
The Pittsburgh Mills, “in terms of tenancy, is not nearly as distressed as some of the other properties they’ve bought,” Mr. Dittmer said. “They paid about $11 million for it, so they don’t have a lot going in. If they can generate a little cash flow, they could get a decent return on it.”
Meanwhile, bond holders are going to take a big hit on the sale. The Mills was used to back loans, dubbed commercial mortgage-backed securities.
Those investors will take a more than 90 percent loss on their investment, said Manus Clancy, senior managing director at Trepp LLC, a New York City market research firm that tracks the mall.
“The bondholders will take a bath on that asset,” Mr. Clancy said. He noted there’s $133 million outstanding on the loan made in 2007. Around the same time, the property was appraised for $190 million.
With a sale price of $11.3 million, that’s a more than $120 million loss, he said.
Still, a loss of that size isn’t out of the ordinary, Mr. Clancy said. “You see this from time to time with retail properties.”
What is out of the ordinary is the younger age of the Pittsburgh Mills, which has been open for almost 13 years.
“Usually, this affects malls built in the 1950s, ‘60s and ‘70s,” he said. “But it is part of the broader national trend for retail.”
There are a lot of factors weighing down traditional shopping centers: Online shopping is siphoning money from brick-and-mortar stores. More consumers prefer to spend their money on experiences and gadgets. And many retailers are carrying debt.
Department stores like J.C. Penney, Macy’s and Sears — among the names that frequently serve as mall anchors — have announced plans to cut stores in recent years. And the companies that take smaller storefronts inside the mall — the Limited Inc., Payless and Cranberry-based rue21 are among those who have declared bankruptcy.
The Pittsburgh Mills is still anchored by J.C. Penney, Macy’s, Dick’s Sporting Goods and a Cinemark theater, but has lost others over the years, including Sears.
The mall development originally was developed as a partnership between Johnstown-based Zamias Services Inc. and Mills Corp., a Virginia-based firm that filed for Chapter 11 bankruptcy protection in 2007. The property sold includes the enclosed 1.1 million-square-foot mall and several parcels of vacant commercial land surrounding it. It doesn’t include the nearby shopping centers called The Village at Pittsburgh Mills.
There are a lot of factors weighing down traditional shopping centers: Online shopping is siphoning money from brick-and-mortar stores. More consumers prefer to spend their money on experiences and gadgets. And many retailers are carrying debt.