The troubled Lakeforest Mall in Gaithersburg, Maryland, was reportedly sold at an auction on Tuesday for less than half what the property is worth.
U.S. Bank bought the 1 million-square-foot property from Five Mile Capital for $19.1 million, less than half of its $40.2 million appraisal value, the Washington Business Journal reported. Five Mile owed $80 million on their mortgage, but in January, the firm stopped sending payments.
The mall will continue operating normally for now, Paul DeMarco, the mall's general manager, said.
"There are no anticipated changes to the property at this time. We anticipate a smooth transition to the new ownership and expect the center to serve the community," DeMarco read from a statement distributed by JLL, the mall's management company.
The previous owner, Five Mile, specializes in investing in problem properties. The firm bought the mall from Simon Property Group in 2012 when Simon defaulted on a loan with $138.7 million left on the balance sheet, the Washington Business Journal said.
When Five Mile bought Lakeforest Mall, the firm said it would give the mall a $20 million dollar makeover, but only invested $1.3 million, the report said.
Since being acquired by Five Mile, the mall has faced problems including falling property values, declining revenue and crime.
The appraised value of Lakeforest Mall in 2012 was $218.9 million, more than five times its current worth. Net operating income fell by more than 50 percent since Five Mile bought the property, the Washington Business Journal reported.
In June, alleged members of the gang MS-13 chased two men into the mall and stabbed them, causing minor injuries, WTOP reported.
A 63-year-old woman was stabbed in the mall’s parking lot during the 2015 holiday shopping season after she refused to give her attacker money, News4 reported.
DeMarco, the mall's manager, said the mall is safe despite these crimes.
"We have a perception of having a lot of crime here, which is not true," he said. "Rumors start and take on a life of their own."
Still, retail sales are slow, and Lakeforest Mall is no exception, DeMarco said.
Several stores, including Gymboree and rue21, have closed. The mall still has its four anchor department stores: Macy’s, Lord & Taylor, JCPenney and Sears.
The mall's previous owner, Five Mile, asked their mortgage servicer to modify the loan in 2016 after some stores shut down, the Washington Business Journal reported. The mortgage servicer rejected the request in March and announced it would begin the foreclosure process, the report said.
The mall's current owner is looking for a buyer, DeMarco said.