Boscov’s department store anchors the northern end of the Providence Place Mall in the space formerly occupied by the more upscale Nordstrom. (Michael Salerno/Rhode Island Current)
Once the jewel of downtown, the Providence Place mall is no longer in vogue — with shoppers, with tenants, and now, with its lenders.
The flagship state shopping destination was placed into receivership, the state equivalent of bankruptcy, by a Providence County Superior Court judge on Oct. 31. The temporary receivership, first reported by WPRI-TV 12, comes at the request of a group of private lenders who in court filings allege the company that manages the mall owes them $259 million in principal and interest from a loan taken out in 2011.
The $305 million loan is backed by 980,000 square feet of mall space (out of the total 1.3 million square feet) with some of the anchor sites such as Macy’s excluded from the collateral.
Brookfield Properties, the Chicago-based company managing the mall, defaulted on its mortgage loan in May 2021 but staved off serious legal action through a series of extensions on the maturity date, which was pushed off till May 6, 2024. With just over $6.1 million in free cash flow — relative to nearly $255 million in outstanding principal interest owed — Brookfield again asked creditors to push back repayment for another three years, according to a June 2024 report by Kroll Bond Rating Agency.
But the creditors appear to have finally had enough. Local bankruptcy attorney Joseph DiOrio filed a petition on Oct. 29 on behalf of the U.S. National Banking Association asking a Providence County Superior Court judge to place Brookfield into receivership. The petition sets up a transition plan that includes bringing in a Texas-based company to take over mall management, tasking the court-appointed receivers with creating a new operating budget.
Rhode Island Superior Court Judge Brian Stern granted the petition on Oct. 31, naming a pair of West Warwick attorneys as temporary receivers, according to court filings.
Brookfield, which has owned Providence Place since it acquired prior mall owner GGP Inc. in 2018, did not respond to multiple inquiries for comment.
Stern’s order gives attorneys W. Mark Russo and John Dorsey authority to issue a bond up to $500,000 to keep the mall afloat while figuring out next steps.
Which could, according to court documents, include enlisting a real estate broker to advertise the mall for sale and accept offers from interested buyers.
Russo, who helped oversee the receivership and subsequent sale of Westerly Hospital in 2011, said in an email Tuesday that the receivership will not prevent the mall from conducting “business as usual.”
“The tenants of Providence Place mall and the public who visit the mall will not experience any disruption to their day-to-day activities,” Russo said.
At least, for now.
Circling the drain
Timothy Hughes, director of MBA programs at Johnson & Wales University, warned that the mall’s retail tenants, already battling their own profit shortfalls amid changing shopping behaviors, might not stick around to find out what’s next for their landlord.
“They’ve got to be concerned,” Hughes said in an interview on Tuesday. “They depend on the mall management to drive traffic to their stores. Not having seen the leases, I’ve got to think there’s some provision that if the mall is not being managed competently, the tenants can pull out.”
The mall opened in 1999 after a series of delays and changes to financing and development terms. The final funding package for the $460 million project featured a state bond and a tax treaty with the city of Providence. The state deal used mall sales tax revenue to repay the debt on the bond that paid for construction. The state made its final, $73 million payment on the bond in 2019.
The 30-year tax treaty with the city of Providence is set to end in 2028. Under the current agreement, the mall pays $500,000 a year in city property taxes. If taxed at fiscal 2025 city commercial rates, the property would be paying nearly $24.9 million in taxes based on its 2024 city tax-assessed value of $708.7 million.
The pandemic has been widely blamed for the mall’s demise. But Hughes pointed to the 2019 departure of founding anchor Nordstrom as the turning point that began the shopping destination’s fall.
Family-owned department store chain Boscov’s Inc. was brought in to replace Nordstrom, but by virtue of its middle-market appeal, is likely paying far less per-square-foot than its high-end predecessor, Hughes said.
Level99, the gaming-and-dining destination that opened on the mall’s third floor at the beginning of the year, also lacks the return on investment relative to space required, Hughes said.
“Tiffany’s is much smaller on a pure square-foot basis, but there are people in there all day long spending hundreds of thousands of dollars,” Hughes said. “Level99 takes up a lot of space and they don’t do the sales that a specialty retailer would do.”
Meanwhile, Macy’s executives announced earlier this year that they planned to close 150 “underperforming locations.” Macy’s has not said which stores are on the chopping block, but the special servicer appointed to Brookfield’s loan indicated that Macy’s in Providence is on the list of locations planned for closure, according to Kroll Bond Rating Agency’s June report.
The decline in high-profile tenants has sent the mall into a downward spiral: The mall loses appeal to shoppers, which in turn puts strain on the remaining tenants and makes it more difficult for the management company to lure in replacements, Hughes said.
He suspected savvy and in-demand tenants like Apple — which has its only Rhode Island store within the mall — were already looking for a better location.
“If you see some big glass building going up in Cranston, you can bet that’s going to be an Apple store,” Hughes said.
Apple did not respond to inquiries for comment.
The receivership petition filed by DiOrio does not expressly lay out plans to sell the mall. The petition seeks to replace Brookfield with another management company, Texas-based Centennial Real Estate Management LLC, which lists several malls nationwide among its portfolio.
DiOrio declined to comment for this story.
Whether a new manager is truly part of the turnaround plan — or simply a short-term strategy to allow creditors to recoup as much of what they are owed is possible — remains to be seen.
First, creditors need to know the property’s true worth.
Not having seen the leases, I’ve got to think there’s some provision that if the mall is not being managed competently, the tenants can pull out.
– Timothy Hughes, director of MBA programs at Johnson & Wales University
When the mortgage loan was secured in 2011, the mall and attached parking garage were valued at $558 million. But as of May 2021, the appraised value had plummeted to $240 million (distinct from the city government assessment, which was completed solely for property tax purposes), according to rating agency KBRA. In June, KBRA downgraded all of the six classes it rates for the mall’s commercial mortgage-backed security, warning of heightened credit risk amid the already past-due loan.
The court-appointed receivership does not immediately change that conclusion, Roy Chun, senior managing director for KBRA, said in an email on Tuesday.
A mall makeover
While malls nationwide have suffered the same — or even worse fates than Providence in the wake of the pandemic — there’s still a chance for revival in the eyes of Laurie White, president of the Greater Providence Chamber of Commerce.
“I think at this point, we wouldn’t want to rule out the fact that we need a destination shopping experience,” White said in an interview on Tuesday.
White was open to repurposing part of the mall for other uses, but was reluctant to give up on the mall concept entirely.
“I think it’s a real asset,” she said of the mall. “I’m hoping circumstances are such that either a new set of management or new lenders could find a really exciting and creative reuse for the mall.”
The limited space — less than 16 acres — makes it difficult to repurpose the land, Hughes said. Housing options, for example, would be limited, and make little headway to combat the well-documented state housing shortage.
“If it was a wide open space, I’d say tear down and start over,” Hughes said. “But you can’t convert that space so easily.”
Former Providence Mayor and downtown developer Joseph Paolino Jr. named Costco as a prime tenant. The big box retailer has explored, but not followed through on, potential locations in Cranston and Warwick.
But to Paolino, the tenants matter far less than the ownership.
“I think the mall needs local ownership, people who are familiar with doing retail, and have done retail well in this state,” Paolino said in an interview Tuesday. Paolino said he wasn’t interested in making the purchase alone but would be open to joining with other retail moguls, naming Carpionato Group and Steve Lewinstein, who owns property in Wayland Square, as prospective local buyers.
Providence Mayor Brett Smiley’s office remained vague when asked for desired uses for the downtown landmark.
“Like many other malls nationwide, the Mayor believes that Providence Place needs to adapt to changing market conditions,” Josh Estrella, a spokesperson for Smiley, said in an email on Tuesday. “Many successful malls have evolved by incorporating mixed-use development and new commercial spaces to better fit the evolving needs of our community.”
A hearing on the receivership case is scheduled for Dec. 4.
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