CBL writes down Citadel Mall by $20.4 million and expects its lender to foreclose

The owner of Citadel Mall expects to lose the property to its lender.

CBL & Associates Properties Inc. recorded a $20.4 million non-cash impairment charge in the second quarter to write down the Charleston mall’s book value to its estimated fair value, the Chattanooga, Tenn., real estate investment trust said on a conference call Thursday.

“During the quarter we began discussions with the special servicer on a loan secured by Citadel Mall in Charleston, SC,” Farzana Mitchell, CBL’s executive vice president and chief financial officer, said on the call. “We are presently exploring our options but do not believe we will hold the asset long-term and anticipate the servicer will proceed with a foreclosure.”

She said it was too early to give a timeline. CBL recorded the charge, she said, “based on the current probability of a foreclosure.”

The loan secured by the mall had a balance of about $68.3 million at the end of June, carries a 5.68% interest rate and matures in April 2017, according to supplemental financial information CBL posted with its results.

The write-down accounted for most of the $21.0 million in real estate impairment losses that cut into CBL’s second-quarter net income, according to the earnings release CBL issued Wednesday. Net income attributable to common shareholders fell to $501,000, from $18.8 million a year earlier, the company said. The charge was excluded from funds from operations, a measure real estate investment trusts use to report performance.

The rest of the portfolio was steadier. Same-center net operating income rose 1.8% in the quarter, excluding lease termination fees and a one-time item a year earlier, and Stephen Lebovitz, CBL’s president and chief executive officer, said in the release that “favorable operating trends within our portfolio continued this quarter.”

CBL bought Citadel Mall in 2001 as part of its purchase of 21 malls from Cleveland’s Richard E. Jacobs Group, according to its securities filings. The mall opened in 1981. CBL also owns Northwoods Mall in North Charleston, which came in the same deal.