What if you Defaulted on Your Commercial Mortgage and the Bank Refused to Foreclose?

What if you didn’t pay your mortgage and the bank refused to foreclose?

According to the Wall Street Journal, that’s just what happened to Glimcher Realty Trust. They own The Eastland Mall in Charlotte, NC and they have a big commercial mortgage on the place. Their mortgage was due in early September but the property had declined in value to-the-point that it was worth less than Glimcher owed. Obviously they couldn’t refinance it at anywhere near their balance and, in truth, they didn’t want to throw anymore good money after bad anyway. In-order to pay back the bank they would have had to put substantially more money (in debt and equity) into the property than it was worth. Who’s dumb enough to do that? Instead Glimcher just didn’t pay the mortgage. They fully expected the bank to foreclose, but the bank wouldn’t cooperate.
Turns out, the bank didn’t want the giant money pit either.

Glimcher is stuck with the mall for now; if they close the mall and walk away and the bank does not take the deed, they would lose all the value of the mall but still have the $42MM debt on their books.

In the end Glimcher agreed keep making payments and attempt a refi in September of next year.

A REIT tried to give away a $40MM shopping mall and no one wanted it. We are living in interesting times.

Apply for a Commercial Mortgage Loan, Online at www.masterplancapital.com

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