Brevard County’s oldest major mall, Merritt Square, is scheduled to be auctioned May 25 after the owners defaulted on their mortgage payment. Merritt Square opened in 1970 and its roster of stores include traditional retailers such as Dillard’s, J.C Penney, Macy’s, Sears as well as numerous smaller retailers and restaurants, such as Ruby Tuesday.
The property, owned by WP Glimcher Inc., is also home to Cobb Theatres’ Merritt Square 16 Theatre and IMAX. The publicly traded WP Glimcher operates 118 retail centers — enclosed malls, lifestyle centers and shopping plazas — across the United States, including the Melbourne Square mall and Waterford Lakes in Orlando.
The foreclosure process against WP Gilmcher on the Merritt Square property started last February. The process does not mean the mall is closing but it could end up with new ownership, or new mortgage terms depending on what happens May 25. Court documents from April 28 indicate a judgment of $47.3 million for the property.
WP Glimcher isn’t giving a reason for letting the property go into foreclosure. In a report filed with the U.S. Securities and Exchange Commission, the company says of Merritt Square: “Borrower is in default and thus in discussions with loan servicer regarding the nonrecourse mortgage loan on this property.”
John Hancock Life Insurance Co., sold the property for $32.7 million to Bayview Malls LLC in December 2002. Less than three years later, in April 2005, Bayview sold it to Thor Merritt Square LLC for $64.4 million, nearly double the previous sales price. Glimcher Realty Trust took control of the mall in 2007, prior to it being acquired by Washington Prime Group Inc. in January 2015. The company then became WP Gilmcher.
That sale price in 2005, a few years prior to the major recession and the accompanying drop in property values, raised eyebrows among some involved in commercial real estate because three of the anchor stores at Merritt Square own their buildings —Dillard’s, Macy’s and Sears — and do not pay rent to WP Gilmcher. Other major tenants include Books-A-Million and Sports Authority.
According to county records, the annual tax bill for Merritt Square is about $614,000. That’s a liability that would have to be assumed by any party who took control of the mall in a foreclosure proceeding.
Gary Frese, a Melbourne-based commercial property tax lawyer with the Frese Hansen law firm, said it’s likely there would be few bidders on a property the size of Merritt Square.
“It’s so big,” Frese said, “you have to assume it’s a huge amount of money. And since you have to pay in cash on the day of the sale, it would have to be somebody with significant monies. I would think the number of bidders in the case, if there are any, are going to be minimal.”
It’s also possible someone from WP Glimcher could bid at the auction as a way of getting a reduction in mortgage payments.
The situation with Merritt Square comes as more and more shoppers are beginning to change buying habits — buying more products online, frequenting open-air “lifestyle centers” and searching for bargains at deep discount stores.
However, the problems at Merritt Square notwithstanding, some people involved in commercial real estate in Brevard, say Merritt Island’s economy has been improving. Ralph Perrone, the owner of Perrone Properties, has several commercial properties on Merritt Island and has seen rents and occupancy rates bounce back from the previous recessions and the downsizing at the Kennedy Space Center. (For example, Perrone is close to inking a lease for the former Circuit City building, across the street from the mall.)
And he said he’s also familiar with the situation at Merritt Square and doesn’t envision a bad turnout for the mall.
“There is absolutely no way that mall is going to close,” Perrone said.
WP Glimcher lists Merritt Square as being 94.5 percent occupied.
Merritt Square is not Brevard’s first enclosed mall – the 285,000-square-foot Searstown Mall in Titusville opened in 1966. The 275,000-square-foot Miracle City Mall, also in Titusville, opened two years after that. But Merritt Square ushered the modern era of enclosed shopping mall and was Brevard’s first major retail center with 811,410 square feet of shopping, common areas, food court and movie theater. It remains one of the of the largest retail properties on the Space Coast.
Melbourne Square, which opened in 1982, has 724,748 square feet.
Contact Price at 321-242-3658 or firstname.lastname@example.org. You can also follow him on Twitter @Fla2dayBiz