Taubman May Turn Over Atlantic City Property to Lender

Regional mall REIT Taubman Centers is opting to take a writedown and may relinquish control of The Pier Shops at Caesars in Atlantic City to its lender. In addition to potentially handing in the keys on The Pier Shops, it is taking a writedown on Regency Square in Richmond, Va. The moves will result in a $161 to $169 million hit to its earnings in the third quarter.

In addition, according to Taubman,

"The Company's conclusion was based on a decision by its Board of Directors, in connection with a review of the Company's capital plan, to discontinue its financial support of The Pier. The Company intends to immediately begin discussions with the lender of the $135 million non-recourse mortgage loan secured by the leasehold interest in the center, and subject to the lender's future decisions, will continue management and leasing of the center."

CityBiz News posted the text from an 8K filing dated Sept. 17 that explains the company's moves. It also issued a press release on the moves yesterday morning.

According to Bloomberg's story:

The Pier Shops are about 80 percent occupied, Payne said.

The mall owner has a $135 million mortgage on the New Jersey shore property, according to the company's statement. Payne said the REIT intends to “immediately” begin discussions with Centerline Capital Group, the debt servicer working on behalf of bondholders who bought securities backed by the loan.

Negotiations could lead to an auction of the property, she said.

“We're happy to manage it while it goes through this transition,” Payne said. “We've got to have them move towards them taking control and ownership of the asset.”

Back in 2005, Atlantic City was abuzz with activity and there was excitement for projects like The Pier that were supposed to transform the city from its seedy past into a mini Las Vegas replete with luxury casinos and first rate retail. Those plans seem to have sputtered out. It's a big statement about the prospects for the city going forward that Taubman is considering turning the center over to its lenders rather than trying to work a deal to keep the property under its control. Sure, it still wants to manage the property but that's different than owning it outright.

The Pier is not the only casino-related retail project that Taubman's involved it that has had issues. It recently pulled out of Macao Studio City--a major project slated to be built in China's gambling mecca, although it hasn't ruled out getting back involved in the project. It's also the retail developer for the mammoth MGM City Center project that flirted with bankruptcy earlier this year.

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