PROVIDENCE – Providence Place mall is now in the hands of two Warwick-based attorneys.
John Dorsey and Mark Russo were appointed as temporary receivers of the mall on Nov. 1 by Providence Superior Court Judge Brian P. Stern.
The attorney’s appointment came after Stern granted a petition receivership – state-level version of bankruptcy – by the U.S. Bank National Association Thursday. Court records show that U.S. Bank National Association represents lenders who granted a $305 million loan in 2011 to GGP-Providence Place LLC and Brookfield Properties.
The lenders, which petitioned for receivership Oct. 29, say Brookfield Properties still owe more than $259 million on the loan.
In May 2021, Brookfield Properties defaulted on its mortgage and the loan was transferred to a special servicer in anticipation of the failure to pay. Special servers take over commercial mortgage-backed securities when borrowers can’t pay and usually work out a loan modification or debt repayment or foreclosure.
Brookfield financed the maturity date to 2022, along with two one-year extensions, bringing the final maturity date to May 6, 2024.
In June, Kroll Bond Rating Agency downgraded all six of the classes it rates from the mall’s commercial mortgage-back security. The downgrades come after Trepp, a firm that provides information on commercial mortgages, reported in April that the mall’s loan was transferred because of an “imminent maturity default” and that it would go into maturity default in May. A maturity default happens when the borrower can’t refinance their loan, leaving them with a large “balloon” payment.
A spokesperson for Brookfield Properties has not responded to PBN’s several requests for comment.
Now Dorsey and Russo will take possession of the mall and any documents or information “reasonably required to own, operate or manage the mall,” according to court records. Among the attorneys other responsibilities as temporary receivers include, implementing a “transition plan” and hiring Centennial Real Estate Management as property manager of the mall.
A hearing is scheduled for Dec. 4 to appoint a permanent receiver.
Receivership is not ideal, but it’s not a death sentence for the mall.
The mall's tenants will continue conducting business as usual and shoppers will not notice any disruptions, Russo said in an email to Providence Business News Monday.
"The Providence Place Mall is an extremely valuable asset to the State of Rhode Island and the City of Providence. As Receivers, we are going to work with all stakeholders to safeguard that asset," Russo said. "At this point, we are working on a Property Management transition per the Court’s Order."
Despite the financial difficulties, the metrics indicate Providence Place mall tenants are performing well overall. According to KBRA, the mall averaged $748 in sales per square foot for the year ended September 2023, where sales of between $400 and $800 per square foot are considered good. [When removing the sales figures of the Apple Inc. store – the mall’s fifth-largest tenant and responsible for 3% of base rent – that sales per square foot drops to $536, KBRA said.]
The mall can still operate if it defaults on its loans though the owners will need to reach new agreements with debt holders, Timothy Howes, finance professor at Johnson & Wales University, previously told PBN. The real red flag is if more high-paying tenants leave.
Macy’s Inc., which replaced Filene’s as an anchor tenant in 2006, announced in February it will close 50 stores in the next few months and another 100 over three years. In its June report KBRA said the borrower has indicated to the loan servicer that the Providence Place Macy’s store is on the list of locations planned for closure. However, a spokesperson for Macy’s would only say in July that a “final decision on specific locations has yet to be made. A spokesperson for Macy’s has not responded to PBN’s request for comment Monday.
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.
