Utah Mall’s Travails Expose Property Weak Link:
The Gateway shopping mall in Salt Lake City was a symbol of urban renewal when it opened with the start of the 2002 Olympic Games. Now it’s losing tenants and customers, reflecting the travails of retail real estate across the U.S.
The Gateway’s owner, Retail Properties of America Inc., wrote down its value to $75 million last year after failing to sell the 623,972-square-foot (57,946-square-meter) property and abandoning a planned upgrade. It was valued at $163 million in February 2010, according to data compiled by Bloomberg.
Malls are fighting over a shrinking pool of tenants as shoppers increasingly turn to the Internet. Booksellers and electronics retailers are folding or shifting their focus to online marketing, while struggling department stores leave behind large empty locations.
A $101 million loan on the Gateway was bundled with debt on 95 other properties across the U.S. and sold to investors in the 2010 bond offering, data compiled by Bloomberg show. City Creek Center, a 626,000-square-foot shopping center less than a mile (1.6 kilometers) away, was under construction at the time, according to a prospectus for potential investors in the commercial mortgage-backed securities. Now that mall is open, and it lured the city’s only Apple Inc. store from Gateway.
Moody’s assigned the Gateway loan a “high default probability” in a report last month when the rating company downgraded the CMBS transaction, citing declining performance at the Gateway as the primary reason for the action. Taubman Centers Inc. (TCO)’s City Creek Center, completed in 2012, is siphoning off tenants, dragging the Gateway’s occupancy rate down to 78 percent from 96 percent in 2010, Moody’s said.