The Foothills Mall in Fort Collins is heading toward receivership after its primary lender said in court that the mall failed to make scheduled debt payments in the fall.
In a lawsuit filed to Larimer County District Court this week, MUFG Union Bank N.A. claims that just more than $46 million of unpaid principal and interest remains on the original loan of $145 million. The bank claims that Foothills failed to make its scheduled debt payment on Oct. 9.
The loan was issued in 2014 to a holding company owned by Walton Street Capital, a Chicago-based private equity firm that co-owns the property with Greenwood Village-based Alberta Development Partners LLC. Those two companies led the redevelopment of the Mall into the 620,000-square-foot retail center that reopened in 2015.
Malls have long struggled to survive in recent years as e-commerce became more popular, but the COVID-19 pandemic and resulting stay-at-home orders have decimated mall mainstays across the country. Several brands such as Stein Mart, Brooks Brothers, GNC, J.C. Penney, J. Crew and Neiman Marcus have filed for bankruptcy so far in 2020.
Foothills is not immune to those struggles, often succumbing to a carousel of tenants within the central building and the surrounding pad sites.
Alberta was tasked with maintaining and operating the Mall. However, under a cooperation agreement executed on Dec. 3., the court has placed the Mall in receivership with Greenwood Village-based Cordes & Co.
That agency will become the de-facto operator of the mall and collect rental income and other revenue sources on behalf of the lenders.
A formal foreclosure demand is being processed by the county, the lawsuit said. That filing has not been made public as of Friday morning.
Walton Capital and Alberta did not immediately respond to requests for comment Friday morning.
Josh Birks, the economic health director for the city of Fort Collins, said the city’s involvement in the mall is structured in a way that precludes it from being involved in the foreclosure.
While the city’s urban renewal authority agreed to remit a portion of sales and property tax revenue generated on the Mall’s 77 acres to help service a $72 million bond held by a metropolitan district, those funds were used to build public infrastructure such as the surrounding parking lots and the Foothills Activity Center within the mall.
That debt is separate from the construction debt at issue in the pending foreclosure, meaning the city is not liable for repaying any of it.
Birks also said the city owns the Activity Center free and clear, meaning that it would not be involved in the foreclosure proceedings.
While Birks doesn’t believe the pending foreclosure will have any short-term impacts on the businesses currently operating in the mall, the future of retailers at large is an open question.
“I don’t know that anybody really knows what’s going to be happening with retail as it comes out of the COVID crisis, and what that means for the future,” he said. “But it’s definitely something we’re looking at closely at the city and trying to figure out how we can be supportive.”