An email dated February 10, 2010 from Councilmember Katie Witt to a constituent reveals that Panattoni, owner of Twin Peaks Mall, is in serious financial difficulty. The future of Twin Peaks Mall is in jeopardy and may fall victim to a “fire sale.”
According to Witt’s email, the Twin Peaks Mall was purchased for $37 million and is now worth only $17 million. She also states that Panattoni placed $8 million down when the mall was purchased
Because of the collapse of the financial industry which began in the spring of 2008, greater accountability is now required from financial institutions. Banks are “shedding loans that do not have at least 50% equity invested in the property.” Since the Twin Peaks Mall loan currently fails to meet that criterion, Bank of America may call the loan and the mall would likely be sold to the highest bidder.
“There is a commercial real estate crisis on the horizon, and there are no easy solutions to the risks commercial real estate may pose to the financial system and the public,” says a report issued Thursday by the Congressional Oversight Panel, the bailout watchdog led by Harvard Law professor and middle-class advocate Elizabeth Warren.
The six-minute video of the Congressional Oversight Panel provides an explanation of what is likely to occur in the commercial real estate market that is well worth the time to listen:
In an article published Thursday on Huffington Post (Elizabeth Warren Warns About Commercial Real Estate Crisis, ‘Downward Spiral’ For Small Businesses, Local Banks), “Over the next five years, about $1.4 trillion in commercial real estate loans will reach the end of their terms and require new financing. Nearly half are “underwater,” meaning the borrower owes more than the property is worth. Commercial property values have fallen more than 40 percent nationally since their 2007 peak. Vacancy rates are up and rents are down, further driving down the value of these properties.”
The previous council under the leadership of Roger Lange tried on several occasions to explain to the Longmont community that decisions regarding the redevelopment of Twin Peaks Mall rested in the hands of Panattoni, the developer. This writer, on numerous occasions since the fall of 2008, asked Will Damrath, who recently left Panattoni, to “show us the money.” Until now, the reality of the situation facing the developer has not been revealed to the Longmont public.
Fortunately, the previous council approached the project with caution and due diligence. Only an Urban Renewal Plan was authorized. Had a commitment been made by the city using the common financial mechanism of Tax Increment Financing, the financial situation of the city itself would have been seriously jeopardized.
The current majority led by Bryan Baum campaigned against the previous council with promises that they would see to it that progress would be made on the Mall’s redevelopment. Longmont residents would be justified in asking them, “What did you know and when did you know it?”
Perhaps Panattoni will find an investor that will join them in reaching the threshold for refinancing. However, given the experience of 2009 including the closing of Albertson’s and the upcoming closing of K-Mart, our community should double its efforts to support our local businesses. That may be the best that we can do at this time to sustain our community.
image of email from public records (jpg, 360K)
02/10/2010 11:14 AM
Re: Twin Peaks Mall
Katie Witt to Ron
From: Katie Witt/Longmont
To: “Ron” <firstname.lastname@example.org>
Dear Ron –
Please forgive me for not returning your email sooner. I read it, but then
didn’t have time to respond, and then it got lost in a pile of other emails.
Here is the situation on the mall:
Panatonni purchased the mall for $37m. Currently, it is only worth S17m. They put $8m down on the project. Due to new banking regulations, banks are shedding loans that do not have at least 50% equity invested in the property. If Bank of America calls their note, our mall will be sold to the highest bidder, although I do not believe that will happen. Mayor Baum has been working hard ~o find equity partners to come in and make up the difference, but I am not sure that Panatonni liked the terms they were offering. We have just heard in the past few days of a reorganization within the company that leads me to believe that Panatonni has an idea of how to pull themselves out of this situation. Since this is privately owned property, Longmont has no control over the timeline prior to the company putting in an application for redevelopment. We are smoothing the way as best we can, but toe many variables are outside of our control (ie bank lending practices).
Let me assure you that city council, as well as city staff, is committed to seeing the mall succeed. We will do all that we can ethically do in order to see our mall back on its feet and thriving.
Please let me know if I can answer any more questions for you. I promise it will not take me as long to answer!
—–“Ron ” <email@example.com> wrote: —–
From: “Ron” <firstname.lastname@example.org>
Date: 01/23/2010 12:51PM
Subject: Twin Peaks Mall
Council member Katie Witt,
I would like to know the status of where the City Council sits in regards to the Twin Peaks Mall. More tenants are leaving shoppers are forced to go outside of Longmont and the Theater is somewhat atrocious.