Fayetteville Mall Sells For $39.5M to New York Investors

A New York-based venture has completed a deal to buy the Northwest Arkansas Mall in Fayetteville for $39.5 million.

Namdar Realty Group LLC and Mason Asset Management Inc., frequent partners in real estate acquisitions, are behind the purchase, along with CH Capital Group. All are headquartered in Great Neck.

The deed was recorded Dec. 30 at the Washington County Courthouse in Fayetteville.

Jeff Bishop, a senior general manager at the Northwest Arkansas Mall, referred all questions to Elliott Nassim, president of Mason Asset Management.

When reached by telephone, Nassim declined to discuss specifics relating to the purchase.

“We normally don’t comment to the press,” he explained.

However, Joel Gorjian, Namdar’s vice president of acquisitions and dispositions, did confirm the acquisition.

“I like the market there,” Gorjian said of Northwest Arkansas. “It’s very stable, there’s population growth, and I want to buy more properties in Arkansas. This is our first asset we’ve bought there, and so far it’s been nothing but a good taste in our mouth.”

NW Arkansas Mall Realty LLC, NW Arkansas CH LLC and NW Arkansas Nassim LLC were the limited liability companies formed to complete the purchase.

Israel Discount Bank of New York issued a five-year mortgage of $29.6 million to help fund the deal, according to Washington County records.

CWCapital Asset Management LLC, the special servicer for the loan and real estate portfolio associated with the Fayetteville mall, was the seller, through an entity called 4201 North Shiloh Drive Holdings LLC. The lender took over the mall from the previous ownership group in September 2011.

Midwest Mall Properties, at the time a partnership among Doyle Rogers and John Flake of Little Rock and Samuel Mathias of Springdale, was the previous owner. The group bought the Northwest Arkansas Mall and two other properties — the Citadel Mall in Colorado Springs, Colorado (1 million SF), and the Crossroads Mall in Oklahoma City (1.2 million SF) — in December 2006 from publicly traded Macerich Co. of Santa Monica, California, in a deal worth approximately $400 million.

According to published reports, Namdar has also recently acquired the Citadel Mall from CWCapital for $20 million.

CWCapital is headquartered in Bethesda, Maryland, with additional offices in Baltimore, Boston, Dallas and New York. Mike Goodwin, a spokesman for CWCapital, declined to comment, citing company policy not to discuss properties in the firm’s portfolio. 

The Northwest Arkansas Mall is one of the largest enclosed shopping centers in the state, with a total of 820,703 gross SF.

It is anchored by J.C. Penney Co. (154,123 SF), Sears (137,125 SF) and Dillard’s (116,000 SF).

However, the Dillard’s portion of the shopping center — and its parking lots — is under separate ownership and not included in the Namdar purchase.

Two contiguous outparcels just south of the shopping center are, however, included in the deal, one a vacant five-acre lot and the other housing a vacant building that was most recently a Hooters restaurant.

The property also includes several wooded acres to the north of the mall.

Namdar, Gorjian said, owns more than 20 million SF of commercial real estate in the United States and is growing “at an unprecedented pace.” The company’s portfolio, which lists 48 properties on its website, includes a number of retail strip centers and medical and/or office buildings.

The Northwest Arkansas Mall purchase was the company’s 26th purchase of 2015.

The company has a history of breathing new life into aging retail centers, which couldn’t hurt the current trend at the Fayetteville mall.

According to data from Trepp LLC, a New York-based analytics firm that provides market research for the real estate and banking industries, total revenues of tenants at the Northwest Arkansas Mall have shown a steady decline, from $13.1 million in 2007 (an average of $1.09 million per month) to $10.2 million in 2014 (an average of $850,000 per month).

Through the first nine months of 2015, the most recent financial data available, revenue generated by tenants of the Northwest Arkansas Mall totaled $7.3 million (an average of about  $811,000 per month.)

Without discussing any specific tenants, Gorjian hopes that adding new and more tenants to the mall’s roster will reverse the declining trend.

“Our niche is identifying malls and shopping centers where we think we can add value,” Gorjian said. “We have a large number of tenants in our portfolio, and we know how to mix and match them. That said, we have some tenants in our back pocket that we plan to bring to the mall down the road.”

 

Reduced Price

The Northwest Arkansas Mall received an appraisal reduction from CWCapital in the spring of 2015. According to Trepp, which tracks the performance of commercial mortgage-backed security deals, the current appraised value of the property is $66.1 million. This is about $91 million less than its 2006 appraisal of $157 million, given when the original mall loan of $125.6 million was issued.

Sean Barrie, a research analyst with Trepp, said the sale of the mall should mean that the current $125.6 million debt on the property will be sold in the coming weeks.

Once that happens, the toxic loan will be paid off, most likely at a significant loss to the loan’s lending bank, Wells Fargo.

“Usually, you can gauge how much [a loan] will sell for based on the sale price of the property,” Barrie explained. “When you see the $39 million sale price, and the fact that the loan is carrying a pretty significant appraisal reduction, that is basically a prediction from the special servicer as to how much of a discount the loan could sell at.”

Barrie said the loan is carrying an appraisal reduction of $74.5 million. Given the current balance is $125.6 million, the server anticipates the loan being sold somewhere in the neighborhood of $51 million.

 

History Lesson

The Northwest Arkansas Mall sits on approximately 110 acres on U.S. 71 near Interstate 49. It includes an eight-unit food court and more than 100 specialty stores and eateries.

According to the mall’s website, the shopping center was originally built as a Sears store in 1970. After a significant expansion, it officially opened on March 2, 1972, as Northwest Arkansas Plaza, a 450,000-SF center with a capacity for 50 stores. Nineteen stores opened on March 2, and 15 followed shortly thereafter. 

Anchoring the center were Sears, Dillard’s, the Boston Store and Woolworth, and it employed more than 700 people.

A major renovation was announced in 1995 to refresh the center’s look with thematic elements incorporating local traditions (i.e., floor patterns mirroring designs from Arkansas quilting), and in 1997 a new food court and additional specialty retailer space were added. 

According to the most recent report in December from CWCapital, total mall occupancy, including Dillard’s, was at 97 percent.