Two recent appraisals cut the Bangor Mall’s value significantly, increasing pressure on new management to pump up revenue by filling empty stores and retaining two of the four anchor tenants, which have leases that expire within 18 months.
The city of Bangor reduced the value of the mall’s leasable space by 22 percent for fiscal 2019, which started July 1, 2018. It dropped the value to $47.4 million as of April 1, 2018, from $60.9 million as of April 1, 2017, according to fiscal 2019 assessed values provided by the Bangor assessor’s office.
And LNR in August dropped the appraised value by 40 percent to $17.3 million from the $28.9 million appraised in October 2017, according to Trepp, a New York-based data analysis firm that tracks commercial mortgages. LNR is a special servicer handling an $80 million loan against the mall that primary owner Simon Property of Indianapolis took out in 2007 and defaulted on in 2017.
The mall was valued at $128 million when the loan was taken out in 2007. The loan default and dropping appraisal value signaled last year that the mall could be headed for foreclosure or sale.
Both Trepp and the Bangor assessor said appraisals are done in different ways and count different aspects of a mall, such as property, empty stores and cash flow. The city of Bangor counts leasable space. LNR did not make clear how it makes appraisals in the Trepp report.
“The assessed value for tax purposes doesn’t correlate with the true value of the property,” said Manus Clancy, senior managing director at Trepp.
“I saw a change in occupancy rates that wasn’t a six-month or one-year cycle,” Bangor City Assessor Phil Drew said. “So it was reasonable to decrease the value [for fiscal 2019]. My duty is to render fair and equitable assessments.”
Ironically, a Bangor Mall tax manager had requested and was refused a rebate on the previous year’s taxes by Drew. In March, the manager asked that the mall be valued at $32 million for tax purposes in fiscal 2018, citing lower occupancy rates and revenue.
Drew denied the abatement request in April, saying the mall had not provided copies of an appraisal he requested. Drew also said that while the mall’s income was down, it still was high enough to justify paying taxes at the 2018 assessed value.
The Bangor Mall appealed Drew’s decision before the city’s Board of Assessment Review, which Drew said upheld his decision. The mall has now taken the request to the state’s appeal board, where no decision has been made yet, Drew said.
When Drew began assessing the mall for the 2019 tax year in January, he said he “recognized the economic realities of the changes among stores on Bangor Mall Boulevard.”
He said of the two types of properties within the mall, the anchor stores had lost 38 percent of occupancy when Sears closed its Bangor Mall store in April. That’s among the 267,000 square feet of the three anchor stores owned by the mall. The empty Sears store occupies 102,000 square feet of that.
The fourth anchor, the former Macy’s store now occupied by Furniture Mattress & More, is owned separately by Miami developer Out of the Box.
Fiscal 2019 vacancies for inline, or core stores, inside the mall, were 19 percent this year in 200,000 square feet compared to around 10 percent last year, Drew said.
He also decreased the assessed value on some other properties along Bangor Mall Boulevard, he said.
He said it is difficult to tell the effect of one troubled or vacant property on the overall tax rate, but noted other new, small businesses popped up in the area to pay taxes
Bangor’s property tax rate rose to $22.95 per $1,000 of assessed value as of July 1, up from $22.55 per $1,000 in the 2018 fiscal year.
With the lower valuation, the Bangor Mall’s taxes for fiscal 2019 are $1.09 million, down from the $1.40 million in fiscal 2018.
The mall’s first half year taxes for 2019 were paid by the deadline of Sept. 17, except for one of the smaller parcels, said Janelle Emerson, deputy tax collector for Bangor. The mall has 11 parcels that are taxed.
An upward climb
The Bangor Mall’s predicament is not unusual as malls around the country lose customers to online retailers, Trepp’s Clancy said.
He said the mall’s financial data are concerning. But one potential bright spot came in July when a Maine Superior Court judge ruled it should be placed under control of a receiver or outside manager who effectively took over the mall and is running its business, including signing leases and upgrading the premises.
According to the most recent Trepp report based on data from LNR, the mall’s annual revenue through this June was $4.24 million compared to $11.8 million in all of 2017. Expenses for the half year were $2.46 million compared to $4.73 million for all of 2017.
But Clancy said he is concerned about the net operating income, which was $1.88 million for the first half of this year compared to $7.07 million for last year. Even if the net operating income doubles until the end of this year to $3.76 million, that total for the year is down significantly from last year.
“That’s a little scary,” Clancy said. And right now, the mall can only pay 74 percent to service its debt.
However, the occupancy rate LNR and Trepp list for the mall of 86 percent in 2017 held relatively steady at 83 percent for the first half of 2018. Again, LNR determines occupancy differently from the city of Bangor.
But Clancy sees an upside in comments made recently by the receiver, Frederick Meno, president and CEO of asset services at The Woodmont Company of Fort Worth, Texas.
Meno told the BDN in September that he plans to keep the mall running as a regional enclosed shopping center. His approach to improving the operating performance of the mall includes improving its physical condition, the manner in which the property and its tenants are advertised and marketed to the public, the level of communication with the mall’s tenants and leasing the property in a manner that maximizes occupancy.
Clancy see two messages in the revenue and management information.
“It’s management’s role to keep a positive spin. A new manager has been brought in and tasked to [restore the mall] and he is optimistic,” Clancy said. “The mall will need to being in new tenants over time to restore the balance to property revenues.”
Key things to watch over the coming 18 months are whether anchor store leases are resigned. JC Penney’s lease expires Feb. 28, 2019, and Dick’s on Jan. 31, 2020. Sears does not have a new tenant yet. And Hannaford’s lease is up Feb. 28, 2019.
Meno of Woodmont said he expects both Dick’s and JC Penney to remain as tenants in the mall.
“If JC Penney and Dick’s renew their leases it’s a good sign,” Trepp’s Clancy said.
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