IOWA CITY — A lender has foreclosed on Iowa City’s Sycamore Mall, calling into question the property’s health as it prepares to lose its primary retail attraction.
The mall’s general manager, however, downplayed the legal action, saying the mall will soon have a new loan.
“It was more of a timing issue than anything else,” Sycamore Mall General Manager Kirk White said. “The mall’s going to be fine.”
Wells Fargo Bank in late October filed a mortgage foreclosure petition against CORE Sycamore Town Center in Johnson County District Court. CORE is a limited liability company that shares an office address with CORE Realty Holdings Management, a California-based property management company and the owner of Sycamore Mall.
Court records say more than $12 million is left on the $13 million loan the bank made to the mall owner in 2008. The loan matured this past September, meaning the final payment was due.
White said CORE believed it was going to get a one-year extension but Wells Fargo made what he described as a last-second decision not to do so. That left CORE scrambling to find other financing. White said the company has a commitment letter for a loan from a local lender, although he declined to name the institution because the deal is not finalized.
White stressed that this was not a nonpayment foreclosure and CORE has made its mortgage payments.
Pat Bauer, a mortgage foreclosure expert at the University of Iowa College of Law, said that may not technically be true if the loan came due in September and CORE did not pay off the principal and interest.
He said the foreclosure may be “a way of lighting a match under” CORE “to get them to move more quickly.”
“What you can say is, is the relationship has soured,” he said. “Wells Fargo doesn’t seem to be interested going forward in working with these guys.”
White said he did not know exactly why Wells Fargo chose to end its relationship with the mall.
It happened, though, one year after Von Maur said it would open a department store in Coralville’s Iowa River Landing development, resulting in the closure of its Sycamore Mall store in 2013.
Von Maur is the most prominent tenant of about 40 at Sycamore Mall. White acknowledged Wells Fargo may have questioned the future viability of the property with the loss of the mall’s anchor store.
“Yeah, I think that would have been a reasonable thought for them to have,” he said.
The city of Coralville gave Von Maur incentives that have been estimated at as high as $16 million to bring the retailer to Iowa River Landing. That brought accusations of piracy for the loss of the Iowa City store and led state lawmakers to review laws governing tax increment financing, the financial tool used to attract Von Maur to Coralville.
Tom Markus, city manager of Iowa City, said malls are valued by their income and the loss of Von Maur hurts Sycamore Mall and likely played a role in Wells Fargo’s decision.
“I think it would be foolish to think that it didn’t,” he said.
Dan Childers, the Cedar Rapids attorney handling the foreclosure proceedings for Wells Fargo, said he did not know the reasons behind the bank’s action. He said CORE could purchase the property at any time before a sheriff’s sale, which would be at least a few months away.
“For the time being, it’s going to continue to operate the way it always has,” he said.
White was bullish on the future of the mall, which is at 88 percent capacity. He said two new tenants have moved in recently and a few more have renewed leases. He also said there have been inquires about the Von Maur space.
Markus said it’s important to the city that the mall continues to be a retail center. The city has helped the mall before, providing $2 million in tax rebates last decade to help spur a resurgence after Sycamore struggled – including going through a foreclosure – following Coral Ridge Mall’s opening.
The property is valued at $11.3 million by the Iowa City Assessor’s Office, down from $16.4 million last year.
Curated by John McGlothlen, The Gazette/Source: Gazette archives