Lenders seize Empire Outlets on Staten Island – Trade Observer
The lenders of New York’s first mall, Staten Island’s Empire Outletsfiled a foreclosure action against the project to restructure its finances after the project faced construction delays and vacancies.
Sterling National Bank and Goldman Sachs‘ Urban Investment Group filed on consensual foreclosure action against the mall owner BFC Partners in Richmond County Court on Monday, the Staten Island Advance reported for the first time. The decision to seize the property means that BFC will no longer own the mall, located at 55 Richmond Terrace adjacent to the Saint Georges Ferry terminal, although the real estate company will retain control of the property during the one-year foreclosure process.
The foreclosure notice alleges that BFC, through an affiliate, Development of St. Georgedefaulted on multiple loans totaling approximately $174 million owed to Goldman Sachs and $38 million owed to Sterling, according to court documents.
“We are committed to the success of Empire Outlets and North Shore, and this action puts the resort in the best possible position for long-term growth,” Sherry Wang, co-head of the urban investment group at Goldman Sachs, said in a statement. “Empire Outlets has played a vital role in the community during the pandemic, and we hope the project will serve as an economic engine as the city continues its recovery.”
The financial restructuring will not change the day-to-day operations of the mall, according to a Goldman Sachs spokesperson. Empire Outlets has hired a JLL team responsible for managing and leasing the property during the restructuring — taking over from Newmark — which will keep tenants in business and save employee jobs at the 350,000 square foot retail complex, CFB Main Joseph Ferrara noted.
“Before the pandemic, Empire Outlets was on track for incredible success, but the mandatory COVID shutdown and near elimination of commuter and tourist traffic had a direct effect on the center’s bottom line,” Ferrara said. in a press release. “Today’s restructuring will protect tenants and preserve the hundreds of existing jobs currently in place at Empire Outlets.”
Empire Outlets began construction in 2015, but the project struggled to get off the ground. The project experienced a series of delays that pushed back its opening date three yearsfrom 2016 to 2019 and was the subject of a lawsuit in 2019 for not paying a Brooklyn-based builder for the construction of a temporary office, the Advance reported. This too missed payments in 2020 on an $8.5 million low-interest loan from the New York City Economic Development Corporation – who gave million project grantsTHE CITY reported.
The project also came under scrutiny in 2016 after being nearly $47 million in state grants after BFC partners donated more than $85,000 to the former governor. Andrew Cuomo, which has come under fire for doling out grants to its biggest donors, Politco reported. BFC then secured an additional $20 million of taxpayers’ money for the project, which the developers said it was used to improve the infrastructure around the project.
The pandemic hasn’t been a walk in the park for the struggling retail destination either. Due to the pandemic, the mall lost 12 tenants covering about 50,000 square feet, or 14% of the leasable area, according to a Goldman Sachs spokesperson. Prior to the onset of the pandemic, the mall had leased or had pending leases for more than 73% of its space.
BFC is involved in developments in Staten Island and Brooklyn, including the 12-story, $151 million building in 475 Bay Streetfor which BFC should get $98 million from the state, as Commercial Observer reported. The company opened a 361,361 square foot mixed-use building in 16-7 Surf Avenue in Coney Island, which will hold 376 affordable units, according to BFC.
Celia Young can be contacted at [email protected].