Lender Seeks to Foreclose on Crossroads Center Mall

(KNSI) – Goldman Sachs has filed a civil complaint in Stearns County District Court asking Crossroads Center Mall be put into receivership.

In the complaint, the bank’s trustee says St. Cloud Mall, L.L.C. fell behind on monthly mortgage payments in August 2020. The mortgage was initially for over $107 million. The borrower still owes over $83 million plus accrued interest and penalties.

The loan was accelerated in February 2021, which is a clause that requires a borrower to pay the entire balance immediately once they miss payments. While the mall continues to be about 90% occupied, the estimated value of the property is falling.

To determine a property’s value, the annual operating income is divided by the cap rate. As the denominator goes higher, the valuation estimate comes down. The mall is now estimated to be worth about $50 million, significantly less than the loan amount still owed.

If granted, the order would allow a representative acting on behalf of the bank to run and maintain the over 800,000-square-foot property until it can be foreclosed on and sold to a new owner.

St. Cloud Mall L.L.C. is owned by parent company Brookfield Corporation. KNSI News has reached out to the lawyers for the lender to see if Brookfield is a guarantor on the loan. St. Cloud Mall L.L.C. is a real estate holding company with the shopping center as its only significant asset. If there are no other guarantors, it will likely declare bankruptcy and the bank will have to settle for a partial repayment depending on where bids come in during the foreclosure process.

Malls have been hit hard by competition from online retailers, department store bankruptcies, and rising interest rates. Stores like J.C. Penney and Sears were counted on to bring in traffic which allowed lesser-known mom-and-pop shops. Commercial real estate values are estimated by the income method, which utilizes a figure known as the capitalization rate. Cap rates move higher in tandem with interest rates and a further premium is added during times of financial stress.

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