Greenbrier Mall has become the latest regional mall in Hampton Roads to enter into the foreclosure process after longtime owners defaulted on a nearly $62 million loan balance.
CBL Properties, which has owned the majority of the nearly 900,000-square-foot mall since 2004, recorded in its annual report to investors last month that the loan they secured matured in December 2019 — the date the final payment was due — and had a balance of $61.6 million as of December 31, 2021.
“The mall had experienced a decline in cash flows due to store closures and rent reductions,” CBL wrote in a section of its report measuring fair market value. “These factors resulted in a reduction of the expected hold period for this asset based on Management’s assessment that there was an increased likelihood that the loan secured by the mall may not be successfully restructured or refinanced.”
A subsequent press release stated the mall was placed into receivership on March 11, meaning the asset goes into control of the lender.
It becomes the second of the region’s seven remaining regional malls with special services currently running the show.New company managing MacArthur Center after former owner defaults on loan
Nick Egelanian, the founder of SiteWorks Retail Real Estate, who has been following the fall of shopping malls and department stores for years, said the mall will likely not see a revitalization in its current form.
“The mall has no future. The mall is going away,” Egelanian said.
The mall, which was built in 1981, has three of its four anchor stores in operation: JCPenney, Macy’s and Dillard’s. Sears closed in 2018, and plans to redevelop it with an entertainment district were scrapped for lack of city support.
However, Egelanian said those stores aren’t top performers.
“The Dillard’s isn’t going to stay in the market, that store does about $12 million. It does about third place in the market. The Penney’s is the worst in the market,” Egelanian said.
While the loan left to repay is near $62 million, Egelanian said the mall’s most recent appraisal may as well be “scrap value” at $35 million.
Across the country, indoor shopping malls have suffered in recent years — and the pandemic has only increased those problems — with shoppers opting to shop online and at discount retailers over traditional department stores that tend to be more high-end.
The special servicer now in control of the mall’s destiny is CW Capital, according to Egelanian. Egelanian said their job is ultimately maximize the capital of the mall ahead of an eventual sale.
10 On Your Side reached out to the mall’s general manager’s office for comment on the mall’s future and was directed to a CBRE email address. CBRE is a global commercial real estate services company.
Our request for comment was not immediately returned.
Chesapeake Mayor Rick West said the city was aware of the mall headed toward foreclosure and hopes the three property owners can agree to sell at once to allow for redevelopment.
Currently, the former Sears property is owned by Seritage Growth Properties and Dillard’s owns its store.
Egelanian said a complete shutdown of the mall could still be years away, however, and that the city shouldn’t try to influence the process at this point.
“What you want if you are the city is to control the outcome of the land long-term,” Egelanian said.
In 2019, Egelanian predicted that only one of the region’s seven remaining malls would survive in its current form in the long-term.
He said retail space grew roughly five times the rate of population growth from 1985 to 2010, and that essentially Hampton Roads had too many malls for its 1.7 million people.
He predicted only Lynnhaven Mall in Virginia Beach would survive in its current form long-term. Aside from minimal changes at Patrick Henry Mall in Newport News, his prediction has proven true in three years’ time.
Since that time, Norfolk’s Military Circle Mall has lost another anchor tenant and has been bought by Norfolk’s Economic Development Authority with plans for massive redevelopment currently being considered.
MacArthur Center in Norfolk is the other mall currently in receivership.
In Virginia Beach, Pembroke Mall recently closed everything but its anchor tenants to undertake a transformation into a mixed-use facility.
The departure of JCPenney this spring from Chesapeake Square Mall left the property with three vacant anchor stores.
In that case however, Pete Kotarides, a manager with the Virginia Beach-based development company Kotardies Development that owns Chesapeake Square, said the departure of the longtime department store opens up the western part of the property for redevelopment.
“We had our second property tour this week with an anchor retailer,” Kotarides said. “We want to get a new lineup of tenants and this is the first domino.”
Kotarides said the former JCPenney, Sears and Macy’s would likely be raised.
“It was thought at the time that these were done, that these malls would never go away. But that has all changed,” Engelanian said.