Lightstone Group is about to lose two of its malls if it doesn't right debt overdue since this summer. The company's Macon Mall, a 1.4-million-square-foot mall in Macon, GA, is scheduled to be on the auction block on Nov. 4, as Lightstone has defaulted on a multi-million loan held in a commercial mortgage-backed securities (Wachovia Commercial Mortgage Securities Inc. Commercial Mortgage Pass-Through Certificates Series 2005-C20) that was secured with the Macon Mall, as well as its 431,000-square-foot Burlington Mall in Burlington, NC.
Lightstone purchased the two malls in summer 2005 from Colonial Properties Group. Macon Mall was acquired for $133.5 million and Burlington Mall was acquired for $32.5 million. Lightstone appointed its outlet retail subsidiary, Prime Retail, to lease and manage the malls.
The CMBS master servicer transferred the loan to special servicing in February due to imminent default. CWCapital Asset Management is the special servicer.
CWCapital had the property reappraised in March. The March appraisal came in at $83.66 million, a reduction of nearly $80 million from an appraised value in 2005.
According to the special servicer, the properties both have new competition in their markets. They have had anchor tenants vacate over last six months and occupancy has dropped.
The Burlington Mall lost anchors JC Penney and Belk to a nearby new project in 2007. The Macon Mall has lost anchors Parisian and Linens 'n Things, as well as a Picadilly Cafeteria restaurant; and the Dillard's department store is closing by the end of this year.
The borrower had requested help in efforts to purchase additional collateral to stabilize and improve the properties but the borrower's request was denied as they were not contributing a sufficient amount of the funds.
The borrower expanded that request and asked that the senior lender and mezzanine lender forgo any collection of debt service for approximately two years. In exchange, the borrower offered to forego management fees (but not leasing commissions). That request was denied.
The loan is now in monetary default and the borrower has said it will not contest a foreclosure. Jones Lang LaSalle Retail has been appointed at receiver/manager of the malls.
The loan has been paid through Aug. 11 and has a current scheduled ending balance of $137.3 million and together with advances has a total exposure of $141.7 million as of Oct. 20. The loan carries an interest rate of 5.758% and is scheduled to mature in July 2015.
Mark Heschemeyer contributed to this story. To view his Watch List column, click here.

This article appears in CoStar's Retail News Roundup: Oct. 12 to 18, 2008, a weekly column covering retail store expansions, closings, bankruptcies, acquisitions/mergers/sales, new retail developments, personnel changes, sustainability, and more.

This week in the Retail Roundup, CoStar reports on expansions or new concepts at Target, WiseBuys, Fresh & Easy, Baja Fresh Express, PBTeen, Filippa K, and Startiste; new retail developments in FL, CA, KS, TX, MD, NV, VA, PA and IL; acquisition, merger, loan or sale activity at Citi, Wells Fargo and Wachovia, O'Connor Capital and Madison Capital, Terramar Retail Centers, Walgreens, Longs and CVS, Landry's Restaurants, General Motors and Chrysler, Spartan Stores and VG Food and Developers Diversified; closings, cutbacks or bankruptcies at two Lightstone malls, Bon-Ton, Goody's Family Clothing and Linens 'n Things; personnel announcements at ICSC Next Generation; and more.