If you think buying real estate is too expensive where you live, perhaps you should head to Pennsylvania. That’s where the Pittsburgh Mills mall in Frazer county just sold for $100. The catch is, it comes with $143 million dollars in debt.
At an auction on January 18th, the mall was auctioned off to Wells Fargo Bank, the same entity that loaned the original owners $133 million in 2006. It had foreclosed on the mall in 2015 when the owners defaulted on the loan, and now had to protect their asset by bidding on it themselves.
Since the bank doesn’t actually have to pay anything it bids, just apply it as a credit towards the $143 million in loans and associated fees, it could have bid up anyone attempting to buy it for a ridiculously low price. It was never in doubt that the bank would retain the mall, due to its rock-bottom value.
At one point in its history, the mall was worth an approximate $190 million dollars, but the most recent appraisal had its value at just $11 million. That’s a huge drop off for the mall itself, and also signifies a symptom in brick and mortar shopping everywhere.
As customers change their shopping habits to online retailers, sprawling malls like this one go empty. The Pittsburgh Post-Gazette reported in December that the mall was only 55% full – that’s retailers, not customers. Storefront everywhere is unfilled, spelling out the end for the original owners.
Apparently promised that the mall would develop things like a go-kart track and water park, residents in the surrounding area are sad to see the mall never materialize into what they imagined.
While Wells-Fargo (who were actually acting as a trustee for MSCI 2007 HQ11) hasn’t commented on a plan going forward, some believe that there will be an attempt to revive the mall given its previous value. For now, life goes on as normal for the few stores still open.