MONEY

University Mall falls into foreclosure

Dan D'Ambrosio
Free Press Staff Writer
The University Mall is across Dorset Street from South Burlington’s proposed new downtown.

University Mall owner Todd Finard confirmed Thursday the 55-acre property on Dorset Street in South Burlington is in foreclosure and will be repossessed probably by the end of the year.

Finard maintains that his company, Boston-based Finard Properties LLC, is in the best position to become the new owner of the mall once it is put back on the market. In the meantime, Finard Properties will default on the $92 million loan it has on the mall, and the loan will be forgiven, Finard said.

Once the property is sold, Finard said his company will owe tax on the difference between the sale price and the loan value, which he estimated could amount to as much as $20 million in taxes.

"We will have to pay a tax on the erosion of value, from the government's perspective that's income," Finard said. "The tax situation will be dealt with and we'll recapitalize the property so it can be redeveloped."

Paul Conner, director of planning and zoning for the City of South Burlington, called the foreclosure "fresh news" that the city has not had time to digest.

"We have not had a conversation yet with the Finards," Conner said. "We're not jumping to any conclusions about what it might mean."

Conner said the Finards have been a "long time community partner" with the City of South Burlington. He said Finard has showed concepts of his redevelopment plans to the city, but has not submitted any formal requests for permitting.

"As this process evolves, we look forward to staying in regular contact (with the Finards)," Conner said. "At this point that's all we know."

Finard said he believes the value of the mall is significantly less than even the $51.4 million appraisal the Burlington Free Press reported in January, down from the previous appraisal of $116.3 million. In January, Finard said the 56 percent decline in the appraised value of the mall reinforced his case for a total makeover of the property, making it a lifestyle destination with housing, entertainment and city offices, rather than solely an enclosed mall.

On Thursday, Finard said the precipitous decline in the value of University Mall has not yet hit bottom.

"The mall may be worth $52 million at this moment, but the trajectory of cash flow and the stores is going down," Finard said. "Somebody is going to need to take control of the property at a number that allows them to make the investments we've laid out to the city (of South Burlington)."

Todd Finard discusses the redevelopment of the University Mall in South Burlington on Tuesday, January 19, 2016.

Finard declined to say how much he believes the mall is worth now.

Last August, Finard told the Free Press he asked for his loan to be put into "technical default" so he could discuss changing the terms of the loan to allow for redevelopment. A "special servicer" took control of the loan.

The loan, which was originated in March 2007 and is due in April 2017, went into default as a result of the request to place it into special servicing. Finard said last August the loan was in "technical default," not a monetary default and that the mall was not going broke.

"There's a monetary default when you stop paying your mortgage," Finard said in August. "There's a technical default when you raise your hand and say, 'I'd like to move this over to special servicing so we can have a conversation because we believe that the terms of the loan should be reworked to accommodate a new development."

Now events have overtaken those discussions, and the mall is in foreclosure. But Finard maintains the "big differentiation" for this foreclosure is that rather than fighting the action, "we elected to cooperate with the lender to maintain our position as managing agent."

"There's no spinning the story, the mall is in foreclosure, but I think the important note is our involvement with the asset will continue through the foreclosure process," Finard said. "We will still be present and running the mall. We're doing that because our expectation is our familiarity with the asset and redevelopment plan means we're the best candidate to regain control of the asset and follow through on those plans."

Changes are a-comin' for University Mall

This story appeared online on July 21, 2016. Contact Dan D’Ambrosio at 660-1841 or ddambrosio@freepressmedia.com. Follow him on Twitter at www.twitter.com/DanDambrosioVT.

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