NWA Mall Sees Appraisal Reduction of $68.5 Million

The Northwest Arkansas Mall in Fayetteville was hit by a $68.5 million appraisal reduction amount, and the decrease in value could determine the eventual sales price of the mall mortgage, or the property itself — if either ever goes to market — a real estate and financial analyst said.

The appraisal reduction amount was issued March 9 by Maryland-based CW Capital Asset Management LLC, the special servicer for the loan and real estate portfolio associated with the Fayetteville mall, according to property and financial files maintained by Trepp LLC, a financial, banking, and real estate industry analyst based in New York.

Sean Barrie, a research analyst with Trepp, said the appraisal reduction amount is not an official, registered appraisal. It is, however, an estimate issued by an industry expert — “a de facto appraisal” — that could be influential when, or if, the mall mortgage, or the mall property, is put on the market.

“The appraisal reduction amount issued by the special servicer is their ‘best guess’ as to how much the mall’s mortgage could sell for if brought to a sale,” Barrie said. “If that amount is 100-percent accurate, the loan would sell at a 54.5-percent loss. … [The appraisal reduction amount] could signal a progression towards a sale of the mortgage.”

The original mall loan was $125.6 million, but with the new appraisal reduction of 55 percent, the loan is now valued at around $57 million, Barrie said.

While the mall is about 820,000 SF, Dillard’s owns about 116,000 SF of that total. The Dillard’s portion is not included in the appraisal reduction amount. 

CW Capital has retail loans and retail real estate for sale all across the country, according to listings posted on its website. Barrie said it is unclear what CW Capital’s plans are for the Northwest Arkansas Mall, but if the mortgage were sold, CW Capital could remove the toxic loan from its books.

A company spokesperson said CW Capital does not comment on properties in its portfolio.

Also on March 9, the Citadel Mall in Colorado Springs, Colorado, received an appraisal reduction amount of $102.9 million, according to Trepp.

The mall properties were purchased in 2007 by MMP Arkansas LLC and MMP Citadel LLC, which borrowed $261.6 million for the deals — $125.6 million for the Arkansas mall, and $136 million for the Colorado mall, according to property and financial records maintained by Trepp.

But the loans went sour, and the properties were signed over to CW Capital in 2011, according to published reports. Both properties are considered REO, or owned by the lender, according to property and financial records maintained by Trepp.

According to Washington County real estate records, the Fayetteville mall is owned by 4201 N. Shiloh Drive Holdings LLC, an affiliate of CW Capital that shares the same Maryland address. 

The mall loan was part of a total Citigroup CMBS package worth $6.6 billion, according to Trepp.

In 2006, when the mall was appraised for the MMP Arkansas LLC purchase, it was valued at $157 million, according to a financial and property file maintained by Trepp. The new appraisal lowers the estimated value by 43.6 percent, to $88.4 million, Barrie said.

Washington County lists an estimated market value of $71.2 million.

Barrie said the mall is in good condition, occupancy is above 95 percent, and mall lease rates are in line with market standards.

But the situation could easily change as the mall’s two largest tenants, J.C. Penney and Sears, are hemorrhaging money. In December, Sears announced 235 closures, and in January, J.C. Penney announced 39.

“The two largest tenants [at Northwest Arkansas Mall] are J.C. Penney and Sears,” Barrie said. “Both these firms have announced closings recently and while their locations at the Northwest Arkansas Mall are still open, it could only be a matter of time before they’re shuttered.”