Dubois Mall, Dubois, Pennsylvania

​

The property was a 440,000 square foot enclosed mall anchored by J.C. Penny, Sears (with its lease expiring in less than a year), Ross Dress for less, Old Navy, Dunham’s Sporting Goods, Big Lots and Staples.  For the five years forward, from the time of restructure, the property lease expiration schedule averaged about 75,000 square feet per year.  This problem was exacerbated by continual declining retail sales figures for virtually every tenant.  The property was encumbered by a $30.3 million first loan which required monthly payments of $205k per month, which was barely covered by $250k in cash flow.  However, it was the impending departure of Sears and the effect such departure would have on smaller tenants with co-tenancy clauses.  Property operations were in a phase transitions to total disaster.  In an effort to head off this problem, the client offered a discounted payoff to the lender in an amount equal to what he believed he could carry while he spent time repositioned the mall and brought in different tenants with different uses.  The negotiations with the lender were complicated and entailed both sides understanding the likelihood of various levels of cash flow deterioration, and whether either side felt more inclined to spend the time and money to revive the property.  To develop a better understanding of what those possible outcomes could be, we built a dynamic cash flow projection model that incorporated all the existing tenants and current operating expenses.  Different scenarios of certain tenants staying at lower rents and other tenants leaving were assumed.  Ultimately, the parties came to their own conclusions regarding upper bound and lower bound projections and a deal was made.