“Black Friday,” the day after Thanksgiving – for decades thought to carry many U.S. retailers from being in the red to being in the black by virtue of deep discounts and unrestrained consumer spending – likely won’t be enough to spare Alamance Crossing from foreclosure or sale, based on a lawsuit filed shortly before the Thanksgiving holiday in Alamance County superior court.
U.S. Bank National Association has filed a lawsuit against the property owner, Alamance Crossing CMBS, to have the property placed in receivership, effectively taking control of its operations, following the default on a nearly $51 million loan.
Alamance Crossing originally opened to great fanfare in August 2007 at 1080 Piper Lane in west Burlington.
The woes of Alamance Crossing have been evident in recent years. While the so-called “anchor tenants” – Dillard’s, Belk, J.C. Penney, who have been present from the outset – and newer anchors in some of its “outparcels” – such as Kohl’s, B.J.’s, and Dick’s Sporting Goods – have been seemingly stable (even when undergoing bankruptcy as in the case of J.C. Penney and Belk) other smaller, retail stores have not.
A ride through the current layout shows at least 15 small- and mid-size vacant storefronts; in some cases, the vacancies have existed for many months or even more than a year.
The property owner, Alamance Crossing CMBS had obtained a $50,800,000 loan from Regions Bank in July 2011, which was secured with a deed of trust to the property, according to a copy of the loan agreement that was filed with the lawsuit in Alamance County civil superior court two weeks ago.
Tennessee-based Alamance Crossing CMBS appears to have been in default since July 2021, according to the suit.
Alamance Crossing CMBS is a subsidiary of CBL & Associates Properties, a Real Estate Investment Trust (REIT). Both companies are based at the same address, at 2030 Hamilton Place Boulevard, Suite 500, in Chattanooga, Tennessee, according to the court file and Alamance County tax records.
Documents on file with Alamance County’s tax department show that the property was purchased by Alamance Crossing LLC for $800,000 in August 2005 and transferred to Alamance Crossing CMBS in 2011.
The county’s tax department became aware in November 2020 that the current property owner had filed a bankruptcy petition, Alamance County tax administrator Jeremy Akins told The Alamance News Wednesday. The account was flagged in the tax department’s records on July 11, 2022, to indicate debt incurred following a bankruptcy petition, Akins said, though he confirmed that the property owner is current on its county tax bills.
The latest assessed tax value for the Alamance Crossing property is listed on county tax records at $35,734,485. The county property tax bill for 2022 totaled $232,274.15, which was paid in full on August 31 of this year, according to Alamance County’s tax department.
In its suit, U.S. Bank alleges that the nearly $51 million loan obtained in July 2011 had matured in full on July 1, 2021, but Alamance Crossing failed to make payments when due and failed to respond to two subsequent demand letters.
U.S. Bank initially notified the property owners of the default by a letter dated September 14, 2021, demanding immediate payment of all amounts due.
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In a follow-up letter, dated December 8, 2021, also included in the court file, U.S. Bank reiterated its demand for payment of the loan in full and further demanded that the “Borrower [turn over] all rents received in connection with the Real Property since the date of default, in addition to all rents received or held by any third-party going forward, and revoked [the] Borrower’s license to collect Rents from the Real Property,” the lawsuit asserts.
U.S. Bank alleges that the following amounts were outstanding, as of October 1, 2022: loan principal of $43,046,464.18; accrued interest of $3,394,943.10; accrued default interest of $1,639,424.35; late fees of $19,429.62; a liquidation fee of $483,325.45; servicing fees of $193,478.80; property protection advances of $38,305.08; a payoff processing fee of $500; minus credit for escrow and reserve funds on deposit of $5,679,452.33, for a total outstanding debt of $41,708,844.89.
U.S. Bank is seeking a temporary restraining order, preliminary injunction, as well as the appointment of a receiver, which the bank contends is necessary to “operate and safe keep the property” and “protect it from waste, preserve its value, and account for and collect the income it may generate,” the suit asserts.
U.S. Bank is asking for a judge to appoint Spinoso Real Estate Group to serve as the receiver for the property and to oversee, administer, and manage its operations, pending foreclosure or another method of disposition, according to the suit. Spinoso Real Estate Group and its CEO, Carmen D. Spinoso, “have extensive experience in commercial retail property management, acquisitions, finance, and leasing and property management throughout the United States, including serving as [a] court-appointed receiver for numerous properties throughout the country [and] in North Carolina,” the complaint states.
Receiver could lock out any tenants that may owe back rent
The bank is also asking the judge to authorize the receiver to: to take possession and control of the property, as well as all documents, books, records, papers, and accounts relating to the property; complete any construction and/or remediation projects necessary for leasing and operation of the property; change “any and all locks” to the property; hire appraisers and any other consultants to inspect the property and records; hire any on-site employees needed to assist with management of the property; and conduct a marketing or leasing program (or hire someone to handle that aspect) to lease or sell the property.
Among other responsibilities, the receiver would also have the legal authority to evict current or future tenants for breaches of their leases; sue for unpaid rents; and/or initiate any court proceedings deemed necessary.
In addition to taking control of the property and managing its assets, the receiver also would be responsible for collecting rent payments from tenants, as the receivership would require Alamance Crossing to immediately surrender possession of the property and any income derived from it, according to the suit.
Alamance Crossing has about 745,553 square feet of rentable space (excluding parking) along Piper Lane in west Burlington, according to a June 24, 2011 analysis of the property that is also included in the court file.
The terms of the loan required Alamance Crossing to make monthly debt service payments (termed in the loan document as “scheduled principal and interest payments”) of $299,041.75, plus $27,990 per month to a “rollover escrow” account, as well as payments to numerous other accounts until the debt was paid off, according to a copy of the loan agreement that is included in the court file.
The initial notice of default and demand for payment that was sent to Alamance Crossing in September 2021 stated that the loan was guaranteed by CBL & Associates Properties and assigned to U.S. Bank National Association, in trust for Deutsche Mortgage and Asset Receiving Corporation.
U.S. Bank is being represented by R. Andrew Hutchinson of the Baker, Donelson, Bearman, Caldwell & Berkowitz law firm in Johnson City, Tennessee.
Alamance Crossing had not filed a response by press time.