The Bangor Mall is asking the city for a steep property tax break, citing sales declines, mall vacancies and increased occupancy costs.
At the same time, Simon Property Group of Indianapolis has turned over ownership of the mall property, buildings and leases to the trustees of a loan that Simon took against the mall and defaulted on last Oct. 1. Representatives for the trustees are now expected to prepare the mall for sale, according to one expert.
Simon has asked the city to drastically lower the appraised value of the mall, which would halve the $1.4 million in property taxes that it pays for this tax year.
In a letter dated Jan. 8, Simon asked the Bangor Assessor’s Office for a tax abatement for the fiscal year from July 11, 2017 through June 30, 2018, citing economic factors that affected the mall.
“The Bangor Mall has suffered greatly over the past few years from a number of economic hardships ranging from sales declines and increased occupancy costs to a rash of vacancies, including a key anchor department store, Macy’s, and, as recently announced, Sears, which will shutter their store in early 2018,” Simon’s tax manager, Aaron Carter, wrote in the abatement request.
Carter said those factors have dropped the mall’s appraised value. The company servicing the defaulted loan, LNR, had the mall appraised at $28.9 million last fall. That’s 77 percent less than the $128 million valuation in 2007, when Simon took out the $80 million loan, using the mall as collateral.
Carter asked the city to value the mall at close to $32 million. That’s nearly half of the city’s appraised value, which was $60.9 million as of April 1, 2017, according to city assessor Philip Drew.
That was around the time Macy’s closed but before Simon defaulted on the loan and Sears announced it would close its anchor store. A series of smaller stores, including Build-A-Bear, JB Robinson Jewelers and the Starbucks kiosk, have closed since November.
Simon has paid property taxes on the 10 parcels it owns in the mall as of Sept. 15, 2017, according to Janelle Emerson, deputy tax collector for Bangor. The next taxes are due March 15. The 11th parcel, the former Macy’s anchor store, was recently purchased by a subsidiary of Miami developer Lionheart Capital.
Drew said Simon has 30 calendar days to provide additional documents to support its tax abatement request. The assessor’s office has 30 additional calendar days to respond to the request.
The city council passed a motion Monday for $10,000 to hire law firm Jensen Baird Gardiner & Henry for legal services related to the abatement request and a possible outside appraisal by the city, if needed, Drew said.
The mall also has a new temporary owner. LNR, the loan servicer, formed a Maine-based company to handle the mall’s property for it and the loan trustees, according to documents filed Jan. 19 with the Penobscot County Registry of Deeds. The company is called MSCI 2007-IQ16 Stillwater Avenue LLC.
“LNR will continue to manage the asset [Bangor Mall] and try to salvage some value,” said Steve Jellinick, vice president at Morningstar Credit Ratings, which rates loans like Simon’s. Rather than letting the mall go into foreclosure, he said, Simon handed over the property to expedite its sale by the trustees. Under the way the loan is structured, Simon was able to turn over the mall to LNR and walk away clean.
Neither Simon nor LNR would comment on the mall’s owners or its possible sale.
The Bangor Mall area makes up almost half of the 6.4 million square feet of retail space in greater Bangor, according to data compiled by Epstein Commercial Real Estate brokers.
Signs of change in the mall’s ownership emerged when the Bangor Mall’s website was taken down recently and redirected to the Simon Property homepage. The Bangor Mall is not listed on that page as one of Simon’s properties.
Additionally, the mall is listed as “other” in two Securities and Exchange Commission financial filings for the last half of 2017. Other properties listed in that category by Simon are for sale or headed toward foreclosure.
This story appears through a media sharing agreement with Bangor Daily News.