Two large West Ashley shopping centers saddled with a combined $94 million in debt will go on the block at court-ordered sales next month.
At a public foreclosure auction, the lender often ends up owning the property. That's especially true when big sums of money are at stake, as is the case with Citadel Mall and West Ashley Shoppes.
Here's how it typically works.
The lender at a foreclosure sale holds most of the cards because it can submit a "credit bid" up to the amount it's owed. It doesn't need to put up any money. The court will then allow other bidders (who are willing and able to pay cash) to top that amount.
In many instances, the lender's bid is so high that it deters other offers. After the deed changes hands, the lender can negotiate a private sale and maybe recoup more than it could at the courthouse steps.
The Charleston County Master of Equity is scheduled to seek bids for Citadel Mall and the nearby West Ashley Shoppes on Jan. 7 and then again on Feb. 6.
The properties will be sold to the high bidders.
West Ashley Shoppes, with anchor stores such as World Market and Monster Music & Movies, is at 946 Orleans Road, directly across from Citadel Mall. Its owner owes about $24.4 million.
Citadel Mall, one of the largest enclosed shopping centers in the state, has fallen on hard times of late. It's more than $69 million in debt.
The mall's big anchors, including Belk, Dillard's, JC Penney, Sears and Target, own their stores outright and aren't part of the foreclosure.
The owners of the two neighboring suburban shopping center were named in lawsuits after missing mortgage payments this summer. Tenants normally aren't directly affected by such transfers.
Citadel Mall's financial woes stem from $75 million its owner borrowed against the property in 2007, right before the last recession kicked in. A bank filed to foreclose in July to help recover the loan proceeds, which had been sold to investors as a type of bond.
The value of the 1.1 million-square-foot shopping center has fallen sharply, to about $23.9 million as of June 30, according to a document that owner CBL & Associates Properties Inc. filed with the Securities and Exchange Commission.
"The mall has experienced declining cash flows which are insufficient to cover the debt service on the mortgage secured by the property," Memphis, Tenn.-based CBL said in its latest quarterly report.
Spinoso Real Estate Group was appointed in September to oversee the center. In monthly reports to the court, the New York-based company has been detailing the problems the mall has been facing.
Aside from some temporary arrangements, the center hasn't leased space to any new businesses in months. And collecting rent from some existing tenants has been a challenge. At least six businesses are more than $11,000 behind in their payments, the reports said.
Also, smaller tenants consistently complain about slow sales, according to the documents.
Across the street, Delaware-based WA Shoppes LLC, which has ties to a New Jersey real estate firm, borrowed more than $20 million to buy the 136,000-square-foot West Ashley Shoppes in 2006.
Court documents show the company started missing its nearly $122,000 monthly bank payments in May but gave no reason.
The Shopping Center Group of Georgia was appointed as receiver after the foreclosure papers were filed in August. The company could not be reached for comment.
West Ashley Shoppes is 95 percent occupied, with 18 tenants.
John McDermott of The Post and Courier contributed to this report. Reach Abigail Darlington at 937-5906 and follow her on Twitter @A_Big_Gail