PROVIDENCE — A Rhode Island judge has ordered Providence Place, the state’s largest shopping mall, into receivership after lenders alleged the mall’s management company owes them more than $259 million.
Superior Court Judge Brian Stern on Thursday granted the petition for receivership — a process similar to bankruptcy in state court — filed earlier this week by US Bank National Association.
On Friday, Stern issued a formal order appointing a temporary receiver and authorized them to “implement a transition plan.” They were also tasked with hiring Texas-based Centennial Real Estate Management to manage the mall, court documents showed.
According to court filings, US Bank National Association represents private lenders who collectively loaned $305 million to GGP-Providence Place LLC and Brookfield Properties, the mall’s Chicago-based management company, in 2011.
In the petition filed on Tuesday, Joseph DiOrio, an attorney representing the association, wrote that the loan was extended and modified in August 2021 and matured on May 6.
Since then, Brookfield Properties “has failed and/or refused to pay” its outstanding balance, which, as of Monday, totaled $259,031,405.65, a figure that includes the principal balance, default interest, and other fees, DiOrio wrote.
He requested the court appoint a receiver to develop an operating budget for the mall and to assume control of its leases, among other requests, including having the receiver bring in a Texas-based mall management company to help handle affairs.
A draft order filed with the petition sought to give the receiver authority to “engage a real estate broker reasonably approved by petitioner to market for sale the mall and to otherwise advertise for sale and solicit offers to purchase the mall,” among other possible actions.
Lindsay Kahn, a spokesperson for Brookfield Properties, told the Globe in an email Friday afternoon: “We are constructively working with the lender to determine the best outcome for the future of the property and the entire community.”
A person who answered the phone at DiOrio’s office said he had no comment on the case.
The 1.4-million-square-foot mall in the heart of Providence opened in 1999 and now boasts approximately 130 tenants, according to an online listing.
Consumer retail trends have shifted heavily in the decades since the mall first opened its doors, as the rise of online shopping has pulled shoppers away from brick and mortar retailers.
The commercial real estate market has also struggled since the pandemic as more people adopted remote and hybrid work schedules, limiting foot traffic to downtown spaces.
“What’s happening at the Providence Place Mall is really a reflection of what’s happening nationally as opposed to what’s happening locally,” said Richard Godfrey, the executive director of the Cummings Institute for Real Estate at Roger Williams University. “I think the Providence retail market is very strong, but there is a general shift in the types of retail operations that consumers are looking for.”
He added that some consumers do their retail shopping online and when they do visit department stores, they are looking for more specific experiences.
“They want to go to small boutique type shops. They’re not all shifting online. They still like the in-person bricks and mortar shopping experience, they just want a different one from the old Macy’s, J.C. Penney’s, Nordstrom’s style.”
Josh Estrella, a spokesperson for Providence Mayor Brett Smiley, told the Globe in an emailed statement the mall needs to adjust to the shifting economics of its business.
“The mayor believes that Providence Place needs to adapt to changing market conditions,” Estrella said. “Many successful malls have evolved by incorporating mixed-use development and new commercial spaces to better fit the evolving needs of our community.”
Thomas Sweeney, from Providence-based commercial brokerage firm Sweeney Real Estate, said the mall’s struggle was a “standalone” situation.
“The fact that it’s the largest retail center in the city, it’s unique. I mean, generally the overall market in Providence is still, you know, I would say stable,” he said in a phone interview.
A receivership may not be the worst thing, he added.
“While it’s not a good thing, it’s not necessarily a bad thing. It allows for the entity that’s been put into receivership to try and figure out how to meet its debt or figure out a way to survive,” Sweeney said.
“Receiverships basically come down to, ‘OK then the math doesn’t work for either the individual or for the financing entity, how can we facilitate getting the best deal we can for all of those involved and moving the project forward?’”
At Providence Place on Friday, some shoppers were shocked by the news of its financial troubles. Others weren’t surprised. But there was also concern about what it would mean for the city.
Roy Barrios, 22, of Pawtucket said he has been coming to Providence Place since he was a kid.
“It’s a really nice – really nice – area to come to, especially like on a Friday like today, or the weekends,” Barrios said. “Everybody’s here and everything’s packed. So that would be a really big loss,” if the mall’s financial troubles were to affect its future.
Frank Rodrigues was at the mall with his 11-year-old daughter who sometimes has her nails done there. High prices could be why Providence Place is struggling, he said.
“People cannot afford to come to the mall and shop. They’d rather shop online, go to Amazon and get stuff for cheap,” the 35-year old Providence resident said. “It would be sad if this place closed because a lot of people do enjoy this place, even though we might not be able to afford everything in it.”
Joe Gaeta, 53, was at the mall with his son. The receivership news made him wonder about the mall’s future.
“It’s such a prominent feature in downtown Providence, and I’ve lived in Providence on and off for my entire life. I remember when this used to be a big parking lot,” he said. “I have a lot of questions as to what would ever happen to this space if it weren’t commercially viable anymore. It’d be really unfortunate.”
But Gaeta also acknowledged that he rarely visited Providence Place anymore as he did most of his shopping online. “The world has changed since this was built,” he said. “We don’t shop in malls anymore and we only come here for a very few reasons, one of which is the Apple Store.”
This story has been updated with comments from Thomas Sweeney, Lindsay Kahn, Roy Barrios, Frank Rodrigues and Joe Gaeta.
Christopher Gavin can be reached at christopher.gavin@globe.com. Omar Mohammed can be reached at omar.mohammed@globe.com. Follow him on Twitter (X) @shurufu.