The loan doesn't mature for two years, but a Blackstone spokesman confirmed that the company is giving up the property through a “consensual foreclosure.”
“We're in a market where the A centers do very well, the B centers struggle and the C centers just get killed,” said Kenneth Galvin, senior vice president in the Oak Brook office of SRS Real Estate Partners who's not involved in the property. “As you start losing anchors and falling down that slope, it's very hard to turn that ship around.”
The Matteson area, he added, has been challenged by disrepair and litigation at the Lincoln Mall, once a key driver of the local retail market, and by new retail developments opening in markets such as Frankfort.
CUB FOODS STORE CLOSED
Marketplace at Matteson, 4020-4300 W. 211th St., has grappled with tenant loss in recent years, including the closure of a 66,557-square-foot Cub Foods grocery store. More than 43 percent of the shopping center is now up for lease, according to marketing materials about the property.
Cub, a unit of Eden Prairie, Minn.-based Supervalu Inc., must pay rent for its space through February 2021, but the store closing has hurt traffic at the property, since grocery stores are a primary draw for shopping centers, according to a Bloomberg L.P. report about the property's loan, which was packaged and resold as part of a commercial mortgage-backed securities offering.
In 2010 and 2011, the property did not produce enough net cash flow to cover debt service payments, according to the Bloomberg report.
The property rebounded in 2012, generating $982,275 in net cash flow vs. $880,320 due in debt-service payments. But that was still 31 percent less than the 2007 peak of $1.4 million in net cash flow.
Blackstone has also seen real estate taxes rise at the center and has been forced to offer free rent and other concessions to attract tenants, according to the Bloomberg report.
“The current market is soft and overbuilt,” the Bloomberg report says.
The property was appraised at $24.4 million in 2006, according to the report. Given its struggles, it's likely not worth that or even the amount of debt on it.
Blackstone took over Marketplace of Matteson in 2011 when it acquired the U.S. assets of Australian shopping center owner Centro Properties Group for about $9.3 billion.
Virtually all of the Centro properties are now part of New York-based Brixmor Property Group, a Blackstone company that went public in October. But Blackstone left the Matteson property out of the Blackstone portfolio because it was not considered a core asset, the Blackstone spokesman said, declining to elaborate.
A CWCapital spokesman had no immediate comment on the suit.