ATLANTIC CITY — The chic shopping mall was supposed to bring Rodeo Drive to the Boardwalk by introducing Atlantic City to such retailers as Gucci, Tiffany and Louis Vuitton.
But the owner of The Pier Shops at Caesars now finds itself in the same position as millions of financially strapped homeowners who can't pay their mortgage: facing foreclosure by the banks.
Taubman Centers Inc., one of the nation's leading mall developers, is preparing to hand over the keys to lenders headed by Bank of America Corp. after defaulting on a $135 million loan for The Pier.
Taubman, now estimating the mall is worth just $52 million in the fragile economy, expects the lender takeover to be complete this year, although the timetable depends on how quickly the final foreclosure proceedings move through the courts. Taubman first announced in September 2009 that it was no longer able to pay its mortgage.
Karen MacDonald, a spokeswoman for the Michigan-based Taubman, said the company will have no involvement in the mall once lenders take charge, not even as a manager during the transition to new ownership.
The banks have not yet divulged plans, but one economist believes they will probably look to sell the mall as quickly as possible instead of trying to operate it themselves. An auction is one option.
"The question is, what do the banks do?" said Joel Naroff, president of Naroff Economic Advisors, a consulting firm based in Holland, Pa. "That's an interesting one, because obviously there is a risk in the maintenance of any property when banks are involved. Not that banks want to run properties into the ground. But they're not entrepreneurs."
For Taubman, the foreclosure means the end of what was viewed as a risky venture to transform the Boardwalk's retailing scene from the ever-present 99-cent souvenir stores and T-shirt shops to tony brand names. Armani, Tiffany & Co., Louis Vuitton, Gucci, Burberry and Salvatore Ferragamo are just a few of the posh shops that occupy The Pier on four levels of retail, dining and entertainment.
"Clearly, that's something that people are asking. Is it too upscale for the average Atlantic City visitor?" Naroff said. "You really need to get to the question: Should it be a shopping center of this type?"
Early on, the mall appeared successful. Robert Taubman, chief executive officer of Taubman Centers, pronounced The Pier as "one of our best shopping centers in the United States" during the property's first anniversary celebration in June 2007.
"It has performed fantastically," Taubman said in an interview with The Press of Atlantic City at that time.
But The Pier's recent performance seems to have mirrored the slumping Atlantic City casino industry. New casino projects that were supposed to draw wealthy customers to town - the type of big spenders who would shop at The Pier - were scrapped because of the weak economy and competition from rival gaming states.
"A number of factors contributed, including the economy overall, competitive gaming and the halting of some of the planned new, upscale hotel developments," MacDonald said in an e-mail explaining why the mall did not succeed under Taubman.
"I thought it was really high-end for this neighborhood," said Gloria Crayton, visiting with two of her friends from Washington, D.C. "The prices are too high when you have consumers that can walk right up the street and go to (The Walk) outlets and get a better deal."
Crayton did buy a blouse when she visited the Pier, but only because it was on sale, she said.
Patty Carrino, 52, of Lyndhurst, Bergen County, said the Boardwalk needs to strike a better balance of high-level shops and affordable retailers.
"I remember the old Atlantic City," she said. "I realize that things have to change, but for someone who doesn't have a lot of money, there should be more of the old dollar-stores that people used to love to visit. It's great to have these kind of stores, too, but not too many people can really afford this."
Crayton's friend, Tasha Bennett, also from Washington D.C., said visitors to Atlantic City likely don't intend to spend a lot of money away from the casino floors.
"What they're trying to do is be like Vegas, but Atlantic City, for me, is a getaway. Vegas is a vacation," Bennett said. "When I go on vacation, I'm prepared to spend more money than usual."
Ed Murphy, a resident of Houston, also emerged from The Pier on Tuesday empty-handed. Asked if he thought the pricey stores could sustain themselves in Atlantic City, Murphy presented his empty hands, no shopping bag in sight, and said, "Obviously not."
Crayton said the Pier would benefit from offering other attractions besides restaurants and stores, suggesting some type of child or adult entertainment.
One of The Pier's new attractions is an upscale banquet hall and wedding chapel called One Atlantic. Jesse Herman, owner of One Atlantic, said the facility is doing strong business and has not concerned itself with the foreclosure proceedings involving its landlord.
"For us, it's business as usual," Herman said.
Featuring spectacular ocean views, The Pier extends 800 feet over the Atlantic. It is connected by a skybridge to Caesars Atlantic City, but the casino is not part of the mall's ownership. The Pier was carved out of the remains of The Shops at Ocean One, a modest mall that opened in 1983 and fell out of favor when Atlantic City began its pre-recession push for more luxury. The Million Dollar Pier preceded Ocean One and first opened as an amusement pier in 1906.
Naroff argued that Atlantic City should not give up on The Pier's high-end concept. He said luxury shopping, combined with trendy entertainment and restaurants, is key to remaking Atlantic City from a day-trip market to a more appealing, overnight tourist destination.
"It is a critical aspect of the future of Atlantic City," he said. "My hope is that it survives, maybe not like it is, but with a similar concept, so it isn't downscaled. Hopefully, one way or another, it continues with that concept. If it needs to be tweaked, maybe it can introduce a bigger variety of shops."
Staff writer Michael Clark contributed to this report.
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