Westbury's Source mall auction fails

The Source mall, a hit with shoppers when

The Source mall, a hit with shoppers when it opened in 1997, has struggled in recent years after the departure of former anchor tenant Fortunoff, which filed for bankruptcy in 2009, and other major retailers. (March 28, 2012) (Credit: Kevin P. Coughlin)

Lenders took ownership of the Mall at the Source, in Westbury, after a foreclosure auction Tuesday found no buyers willing to pay $148 million to pay off its debts.

Scott Tross, the attorney representing the mall's bondholders, said they will probably not hold on to the mall, and will eventually sell it. Tross declined to give a timetable.

The bondholders are represented by a trust known as CMAT 1999-C1 Old Country Road Llc.

The mall, a hit with shoppers when it opened in 1997, has struggled in recent years after the departure of former anchor tenant Fortunoff, which filed for bankruptcy in 2009, and other major retailers. It is likely to be 75 percent vacant by next month, according to local brokers.

The sale will not interrupt business at the mall, said Bud Perrone, a spokesman for Miami Beach-based LNR Partners, which is the servicer for the loan.

The new owner is likely to bring in new stores within six to nine months, to prepare it for an eventual sale, said Jeremy Isaacs, a broker with Ripco Real Estate in Jericho. "Right now there is someone in charge, someone who will focus on it and try to turn it around," he said. "So it's all good."

The auction took place at 11:30 a.m. at Nassau County Supreme Court in Mineola. It lasted slightly more than a minute.

Tross gave the "upset price" -- or minimum price needed to win the auction -- as $148 million, eliciting whistles of amazement from the crowd of a few dozen people, many of them attending other residential or commercial auctions. That price represents $142 million in outstanding debt and $6 million in accrued interest, Tross said after the auction. The minimum initial bid was $10.2 million.

A man who gave his name as Michael bid $11 million, and Tross countered with $11.1 million.

"I should just jump to the end, right?" the man said.

"We could go all the way up to 148," Tross replied.

"Our final bid is $25 million," the man said.

Tross again outbid him by $100,000. There were no more bids.

After the auction, the man named Michael who bid on the mall said he was a broker from the tri-state region but declined to identify himself further.

A spokesman for Simon Property Group, formerly minority owner of the mall, declined to comment. It was unclear from public records who owned the remaining stake in the property.

The retail center's value was appraised at $51 million in May, according to Trepp, a company that tracks information on commercial loans. The vacant Fortunoff store has a separate, $46.2-million loan that is also in default, according to Trepp.

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