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What are owners of Eastland planning?

The owners of Charlotte's Eastland Mall might walk away from the struggling property instead of repaying a mortgage coming due in September, some analysts are predicting.

That prospect comes as the city is trying to revitalize Eastland, which Columbus, Ohio-based Glimcher Realty Trust has been trying to sell for nearly three years, without success. The firm has a 30-year mortgage but faces much higher payments if it doesn't pay off the $42 million balance by Sept. 11.

However, the 33-year-old mall at Central Avenue and Albemarle Road is now worth less than that amount. As a result, some analysts predict Glimcher will cut its losses and leave, just like a homeowner trapped in a mortgage he or she can no longer afford.

“Management appears ready to hand the keys over to the lender, since the value of the property likely falls far short of the outstanding mortgage amount,” analyst Jim Sullivan of California-based Green Street Advisors wrote in a recent research report, according to the Wall Street Journal.

Glimcher has worked all year to renegotiate the terms of the mortgage with the lender, and those discussions are ongoing, said Marvin Snyder, Eastland's general manager.

Giving the mall to lenders is currently not a possibility, he said, and the parties hope to reach a deal as soon as possible. “Both sides know we need to come up with a new mortgage,” he said.

Glimcher's corporate offices did not respond to a request for comment Monday. Asked earlier this year whether the company would consider returning the mall to lenders if it could not find a buyer, chairman and CEO Michael Glimcher said, “It's not our intention to own Eastland at the end of the year.”

Once a regional shopping destination, the Eastland area has been hit by rising vacancies, shifting demographics and a perception of crime in recent years.

At Eastland, redevelopment has been complicated by the fact that the mall is controlled by five separate property owners – each of the four anchor spaces, and the interior, owned by Glimcher. To gain a greater stake in the process, the city of Charlotte in March bought a $75,000 option that would allow it to purchase the empty former Belk store.

Glimcher and a partner bought Eastland for $58 million in 1998. Then, the 1.1-million square foot center was 94 percent leased, and the region had less competition. In 2003, Glimcher purchased the rest of the mall for $4.75 million.

Eastland is now about one-fourth vacant, and many national chains have departed. The center's average sales are $232 per square foot, according to Glimcher's 2007 annual report – well below the companywide average of $351.

Nonetheless, the mall remains open with nearly 100 tenants, according to its Web site – including Sears and a range of smaller shops.

Tom Flynn, Charlotte's economic development director, said the September deadline should not affect the mall's near-term operation. But change is certain in the long term, no matter what happens with the loan.

“I think anyone who would be interested in buying the mall needs to have a very, very different strategy,” Flynn said. “Because there's not a market for a million square feet of retail at that location at this time, or in that particular physical layout.”

The owners of Charlotte's Eastland Mall might walk away from the struggling property instead of repaying a mortgage coming due in September, some analysts are predicting.

That prospect comes as the city is trying to revitalize Eastland, which Columbus, Ohio-based Glimcher Realty Trust has been trying to sell for nearly three years, without success. The firm has a 30-year mortgage but faces much higher payments if it doesn't pay off the $42 million balance by Sept. 11.

However, the 33-year-old mall at Central Avenue and Albemarle Road is now worth less than that amount. As a result, some analysts predict Glimcher will cut its losses and leave, just like a homeowner trapped in a mortgage he or she can no longer afford.

“Management appears ready to hand the keys over to the lender, since the value of the property likely falls far short of the outstanding mortgage amount,” analyst Jim Sullivan of California-based Green Street Advisors wrote in a recent research report, according to the Wall Street Journal.

Glimcher has worked all year to renegotiate the terms of the mortgage with the lender, and those discussions are ongoing, said Marvin Snyder, Eastland's general manager.

Giving the mall to lenders is currently not a possibility, he said, and the parties hope to reach a deal as soon as possible. “Both sides know we need to come up with a new mortgage,” he said.

Glimcher's corporate offices did not respond to a request for comment Monday. Asked earlier this year whether the company would consider returning the mall to lenders if it could not find a buyer, chairman and CEO Michael Glimcher said, “It's not our intention to own Eastland at the end of the year.”

Once a regional shopping destination, the Eastland area has been hit by rising vacancies, shifting demographics and a perception of crime in recent years.

At Eastland, redevelopment has been complicated by the fact that the mall is controlled by five separate property owners – each of the four anchor spaces, and the interior, owned by Glimcher. To gain a greater stake in the process, the city of Charlotte in March bought a $75,000 option that would allow it to purchase the empty former Belk store.

Glimcher and a partner bought Eastland for $58 million in 1998. Then, the 1.1-million square foot center was 94 percent leased, and the region had less competition. In 2003, Glimcher purchased the rest of the mall for $4.75 million.

Eastland is now about one-fourth vacant, and many national chains have departed. The center's average sales are $232 per square foot, according to Glimcher's 2007 annual report – well below the companywide average of $351.

Nonetheless, the mall remains open with nearly 100 tenants, according to its Web site – including Sears and a range of smaller shops.

Tom Flynn, Charlotte's economic development director, said the September deadline should not affect the mall's near-term operation. But change is certain in the long term, no matter what happens with the loan.

“I think anyone who would be interested in buying the mall needs to have a very, very different strategy,” Flynn said. “Because there's not a market for a million square feet of retail at that location at this time, or in that particular physical layout.”

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