Crossroads Center Mall Foreclosure Fallout Likely Contained

(KNSI) – The impending foreclosure of the Crossroads Center mall may not have as big of an impact on commercial real estate as its $107 million loan size might suggest.

St. Cloud State University Economist King Banaian says the almost 900,000-square-foot property is too unique, even among retail lots, to draw broad conclusions for the sector as a whole. “I don’t think it’s gonna matter to other buildings that have, say, a single tenant like a Best Buy or a Target. I think those are very different creatures than a mall.”

Retail centers have struggled since the financial recession of 2008-09 as consumers shift their spending to online in greater degrees. However, almost every closure to this point has focused on less desirable properties, Class B or lower. Banaian says just being a mall, even a premier one, isn’t enough anymore. “Class A malls that are doing better are finding other ways to bring visitors into their mall space. It’s got to be something other than the volume of the number of choices in the mall you have to go to, right, because you can get that online but you can’t recreate that personal experience.”

The owner of Crossroads Center stopped paying its commercial mortgage in August 2020. The mall was originally part of a portfolio at GGP, which was then bought by Brookfield Properties. They are the parent organization of real estate holding company, St. Cloud Mall, L.L.C., which is officially listed as the borrower. Almost $84 million is still owed on the loan, plus accrued interest and penalties. Even with the foreclosure, Banaian says he expects it to continue to be a shopping center for years to come.

“They will operate it as a mall but they’re gonna get it at a price where the rent they have to charge to make the financials work is going to be less. I see there being a buyer down the road that probably continues it substantially in the same way that it’s been before,” he predicts.

Banaian says the location makes it too valuable for the right owner at the right price. He says the only competition is in the Twin Cities suburbs and out to Alexandria, both about an hour away.

Another area of concern in St. Cloud and several other cities is office space. Banaian says the stresses there will be analyzed using a different set of criteria than the mall. St. Cloud and St. Paul have recently announced pushes to get more people to live downtown to help.

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