Troubled Mall Sells To Its Own Lenders For $100

Image courtesy of Galleria at Pittsburgh Mills/Facebook

The Galleria at Pittsburgh Mills is pretty typical for a troubled mall: it opened in 2005, but is now financially distressed. It didn’t have enough customers to support its retailers. While the mall still has anchors like Macy’s, JCPenney, and Dick’s, it recently sold at auction for $100. Sort of.

The Pittsburgh Post-Gazette explained the history of the mall and the origins of this weird transaction. The Galleria was originally planned as a center with shopping and entertainment, but developer Mills Corp. filed for bankruptcy just two years after opening the mall, and tried to turn it into a regional shopping center that would draw people from outside the area.

“That mall is simply too large for the trade area,” a real estate executive explained to the Post-Gazette. That’s the area in which people travel to get to a mall or attraction. “It cannot sustain itself in current form and fashion, and needs to reposition itself to be viable.”

To get started on that, Wells Fargo needs to fully take control of the mall back after foreclosing on it in 2015. The bank serves as the trustee for a group of lenders, and a company called C-III Asset Management is handling any redevelopment of the mall in the future. mall’s value was $190 million before its developer filed for bankruptcy in 2007, and it was worth about $11 million last spring.

While the lenders’ representative only bid $100 at this week’s auction, the bank says that the mall owes $142.9 million beyond that, which is why another buyer wouldn’t swoop in and bid $101 for the mall: as a consensual foreclosure, everyone already knows that the trust of lenders is going to take ownership.

That’s Wells Fargo and the other lenders that took over the property after the 2015 foreclosure, which is now able to re-develop the mall, tear it down and build a parking lot, or whatever else it can find to actually make any money from this seemingly doomed property.

Like many malls, it rented space to a non-traditional mall business to make some money from its cavernous space. Unfortunately, it rented to ITT Technical Institute, which closed all of its campuses last fall.

Other dead or dying malls have tried bringing in tenants like churches, colleges, and medical offices. The mall doesn’t lack customers, but has a lot of space to fill.