Developer Of Staten Island's Empire Outlets Hit With Foreclosure, To Lose Control Of Struggling Mall
New York City’s first outlet mall has gone into foreclosure to allow for $350M of debt on the struggling property to be restructured.
BFC Partners developed the 340K SF center at St. George’s Terminal on Staten Island, but it is expected to lose ownership as part of the foreclosure process, which is expected to take a year, the Staten Island Advance reports. BFC will continue to operate the outlet mall, which opened a food court this year, during the process.
BFC owes Goldman Sachs' Urban Investment Group roughly $174M and Sterling National Bank roughly $38M on the property, Commercial Observer reports. The senior lenders on the mall could take control of the property through the foreclosure process.
“We are committed to the success of Empire Outlets and the North Shore, and this action puts the complex in the best possible position for long-term growth,” Sherry Wang, managing director at Goldman Sachs and co-head of the Urban Investment Group, said in a statement. “Empire Outlets has played a vital role in the community during the pandemic, and we hope the project will serve as an economic engine as the city continues its recovery. We are grateful to the community and the tenants for their support during this unprecedented time.”
Empire Outlets opened in 2019 after being delayed four times. Months after opening, much of the center was reportedly still closed and just 26 of the 75 stores had been filled. Anchor tenants at the time included Nordstom Rack, H&M and the Nike Factory Store.
The developers stopped making payments for months in 2020 on a low-interest loan of $8.5M, The City reported. Its construction was partially funded by $47M in state subsidies in 2016, Politico reported, which were criticized because of BFC's contributions to then-Gov. Andrew Cuomo.
Throughout the course of the pandemic, 12 of its tenants, including Brooks Brothers and U.S. Polo, closed permanently. In total, tenants accounting for 50K SF have shut their doors for good, the Advance reports.
A representative from Goldman Sachs said that 73% of the gross leasable space is either filled or has a pending lease. More tenants are paying rent now thanks to co-tenancy clauses being filled, and BFC and Goldman built out a 15K SF food court.
BFC Partners' Joseph Ferrara said the complex had been on track for success, but it had suffered from government-imposed shutdowns and the loss of commuters and tourists. The number of visitors coming to New York has slumped during the pandemic, with the city’s tourism agency NYC & Co., in November predicting total visitor spending for the year to be $24B, down from $47B in 2019.
“Today’s restructuring will protect tenants and preserve the hundreds of existing jobs currently in place at Empire Outlets," Ferrara told the CO in a statement Friday.
