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$50 million in Southlake Mall debt up for sale, which could result in new ownership
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Southlake Mall

$50 million in Southlake Mall debt up for sale, which could result in new ownership

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Southlake Mall auction delayed as mall's future remains up in air

The BAM! book store can be found at the southeast entrance at Southlake Mall.

The ongoing saga over the ownership of Northwest Indiana's largest shopping mall has taken another turn.

Southlake 1st Co., Ltd., a Korean company, is looking to sell $50 million in debt that's in default on the Southlake Mall, which could potentially result in new ownership of the 1.36 million-square-foot mall at U.S. 30 and Mississippi Street in Hobart.

The commercial real estate firm Cushman & Wakefield listed a notice of public auction for the debt, which is a junior, or mezzanine, loan that is subordinate to a $95 million senior loan on the Southlake Mall that is also in default. The purchaser of the $50 million debt — which would likely go for far less than what it was originally worth in the current retail market conditions — would gain ownership of the mall but then would have to pay off the $95 million senior debt to keep control.

"The pledged entity owns the Southlake Mall, which is a retail shopping center located at 2109 Southlake Mall, and the pledged entity is the borrower under a loan in the original principal amount of $95 million that is secured by a mortgage on the property," Cushman & Wakefield said in the listing. "The mortgage loan is currently in default and has a scheduled maturity date of March 9, 2021."

The buyer would have to pay the full $95 million owed on the senior loan on top of its bid for the junior loan.

Ascena Retail Group filed for bankruptcy and will close some Region stores in a move that could deal blows to the Southlake Mall in Hobart and the Lighthouse Place Premium Outlets in Michigan City, as well as other shopping centers throughout Northwest Indiana.

Cushman & Wakefield is asking for cash bids with no financing on the junior or mezzanine loan to be submitted by April 29. An online public auction is slated for May 13.

"The collateral will be sold as a single unit and is offered as is, where is, with all faults," Cushman & Wakefield said in the listing.

Commercial real estate experts said the Southlake Mall will continue to operate as normal while the ownership issues get sorted out. What's at stake is who will own and operate the mall going forward.

Starwood acquired the mall from Westfield Group in a $1.6 billion deal in 2013, but refinanced its portfolio in 2018 and defaulted on its loans during the start of the coronavirus pandemic last March after its Israeli bonds were downgraded to C- because of the deteriorating retail environment, prompting bondholders to ask to be repaid faster.

California-based Pacific Retail Capital Partners and New York City-based Golden East Investors were appointed as trustees to oversee Southlake Mall, which has suffered from closures like Carson's, Sears and the Disney Store.

See a day in the life of Portage Patrolman Brian Graves in the latest installment of Riding Shotgun with NWI Cops.

Video filmed by Kale Wilk and produced by Scotia White. Interview by Anna Ortiz.

But their stewardship of the mall could end after Israeli bond holders asked the District Court of Tel Aviv to foreclose on the Southlake Mall. It will now end up in the hands of whoever buys the debt out of foreclosure.

Founded in 1974, the two-story Southlake Mall still boasts 7,750 parking spaces and nearly 150 stores, including Macy’s, JCPenney AMC Showplace 12, Dick’s Sporting Goods, H&M, Books-a-Million, and Cooper's Hawk Winery and Restaurant. More than 340,000 people with an average household income of more than $78,000 live within a 10-mile radius of the mall, which is the largest enclosed mall in the Region and the second-largest in the state of Indiana after only the Castleton Square Mall in Indianapolis.

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.

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