The winning bid for 522,088 square feet of Burnsville Center that went up for auction last month is $17 million — a fraction of the $64.2 million that was owed on the property.
A special servicer holding the note on half of the 1.1 million-square-foot mall put it up for auction from Oct. 26-28. Ten-X Commercial, which conducted the auction, now reports escrow has closed on the sale.
Ten-X set the opening bid at $7 million.
The mall, whose decline in the face of online shopping was worsened by the pandemic, was the Midwest’s largest shopping center when it opened in August 1977, Dakota County Commissioner Joe Atkins wrote in a Facebook post this month.
“Keep an eye out for a major redevelopment proposal,” Atkins wrote. “Will the new owners give it a big-time facelift, with new looks and stores? Or will they seek to tear it down and do something else entirely? More to come on this.”
Burnsville Assistant Community Development Director Regina Dean said an auction broker she spoke with expected the property to sell for about $25 million.
The center’s assessed value — and the property tax generated for the city, county and School District 196 — have been falling “dramatically” for a number of years, Dean said.
The “bottom fell out” by 2015, Atkins wrote.
The 522,088 square feet had been owned by Tennesee-based CBL Properties, the mall’s longtime manager.
Attempts by CBL to restructure its debt on the property failed.
In August the company announced it would cooperate with foreclosure proceedings for Burnsville Center and three of its malls in Arkansas, Illinois and Ohio. The company later announced a Chapter 11 bankruptcy filing.
The CBL portion included interior tenant spaces and common areas, as well as four outlots occupied by five tenants, “highlighted by Jared Galleria of Jewelry and Verizon Wireless,” according to the Ten-X auction notice.
The portions of the mall owned by Seritage Growth Properties (the former Sears space vacated in 2017), Macy’s and J.C. Penney were not part of the auction.
According to TheRealDeal, a New York real estate news site, the former CBL property was valued at $137 million in 2010. The $17 million sales price is 87 percent less than the peak value, according to Atkins. The loan’s bondholders lost more than $40 million, according to TheRealDeal.
“If you want to gauge investor sentiment for suburban mall properties,” said a story on the website, “head to Burnsville, Minnesota.”
The CBL property’s net operating income fell from $10.75 million in 2017 to $7.34 million in 2019, the website reported.
The city has been laying the groundwork for redevelopment of the mall and surrounding retail area along both sides of County Road 42. A wider mix of uses, including housing, is envisioned for the area the city has dubbed Center Village.
The city’s plans include a walking and biking tunnel underneath County Road 42 and a new system of grid streets north of 42 between Aldrich Avenue and Burnhaven Drive.
The city will make a third attempt next year at asking state lawmakers for special legislation allowing tax-increment financing authority to raise funds for infrastructure projects and development incentives for Center Village.
The area isn’t blighted, which would qualify it for TIF under state law, but is harmed by changing shopping habits, city officials contend.
For extra clout at the Legislature, the city will try to enlist the support of the county and school district, Dean said.
“Maybe the third time’s a charm,” she said.