A New York real estate investor who specializes in taking over distressed shopping centers has emerged as a possible buyer for a high-end mall that has suffered in Atlantic City’s tourism slump.
Michael Kohan would not disclose how much he has offered for The Pier Shops at Caesars, but said it is below the $20 million minimum bid that was set in August when the mall failed to sell during an online auction.
“We’re ready, willing and able to close,” Kohan said of his desire to reach a final deal.
The Pier has struggled since opening in 2006 amid great expectations that it would add some Madison Avenue-style cachet to a Boardwalk retailing scene better known for 99-cent souvenir stores and cheap T-shirt shops.
Kohan said that despite The Pier’s glitzy retailing mix, including chic stores such as Gucci, Louis Vuitton and Tiffany & Co., the mall is badly in need of new ownership to rejuvenate operations.
“This asset was on the market for a long, long, long time. They need someone like me who does this type of stuff. I take distressed properties and try to revitalize them,” he said.
The 47-year-old Kohan has built a real estate empire across the country by buying struggling shopping centers, some in bankruptcy or foreclosure. He said his holdings include the Mayberry Mall in North Carolina, the Staunton Mall in Virginia and the Crystal River Mall in Florida. Local media outlets have reported that he started buying malls in smaller Midwest markets.
The Pier and its tony shops would elevate Kohan’s portfolio into the higher echelons of retailing. Kohan said he wants to keep the oceanfront mall’s upscale appearance, but would add more lower-priced stores to make shopping more affordable for Atlantic City tourists.
“I’m trying to bring in some A-minus tenants. The prices will be at the level for the tourist,” he said. “We’ll have some Class A tenants, but at a level lower — one or two steps lower than what we have right now.”
Caesars Entertainment, parent company of the Caesars Atlantic City casino hotel, must give approval to Kohan’s offer to buy the mall, he said. Caesars Entertainment spokesman Gary Thompson declined to comment on the possible sale.
The Pier and Caesars are connected by an elevated walkway that spans the Boardwalk. Kohan explained that Caesars owns the land under the mall, although the shopping complex itself is controlled by another group.
Lenders, including U.S. Bank National Association, bought The Pier for $25 million during a foreclosure sale in October 2011. Attempts failed in August to sell the mall during an online auction.
The mall went into foreclosure after its previous owner, Taubman Centers Inc., defaulted on a $149.7 million mortgage. The foreclosure sale brought only a fraction of the mall’s $200 million development cost.
The glossy, four-level structure, which juts out 900 feet over the ocean, opened in 2006 at the height of the Atlantic City real estate boom. Since then, property values have plunged amid the fragile tourism economy and the city’s six-year casino slump.
Kohan said The Pier has a $3 million annual loss on $12 million in operating costs. He said the electric bill alone is $1.1 million per year.
“The mall is beautiful, but you have to pay for something out of your pocket every month,” Kohan said.
The current ownership group brought in Cushman & Wakefield to manage the mall. Representatives of Cushman & Wakefield did not return messages seeking comment about the possible sale to Kohan.
Loan servicer C-III Capital Partners reportedly holds an $80.5 million mortgage on The Pier and had been working with the owners to find a new buyer. C-III spokesman Trevor Gibbons declined to comment on the sale.
Fitch Ratings, a New York credit-ratings firm, said in a March 21 report that attempts to sell the mall have been slowed by offers that were lower than expected. Fitch also noted that a recent appraisal reflected a lower value, although it did not disclose the amount.
“Efforts to stabilize and improve performance at the property have proven to be challenging, and anticipated progress in the workout of this asset has not materialized,” Fitch concluded in another report focusing on The Pier’s finances.
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