Wells Fargo is seeking to foreclose on Towne West Square after its owners didn’t make payments as promised into accounts set aside for improvements and repairs.
Towne West Square LLC failed to pay into two reserve accounts tied to a $51 million loan taken out in 2011 on the 941,000-square-foot property at Kellogg and West, according to the bank’s petition for foreclosure filed Tuesday in Sedgwick County District Court. Wells Fargo is demanding more than $45.6 million in principal plus $220,429.47 in interest and more than $61,000 in other costs and fees.
What, if anything, the filing means for tenants and shoppers is unclear. A spokeswoman for the mall’s owners said she couldn’t comment.
But Wichita businessman Steven Martens, who isn’t affiliated with Towne West Square LLC but agreed to speak to The Eagle generally about commercial real estate, said “there really should be minimal if any impact on shoppers or tenants.”
“From that perspective, life should continue as normal,” said Martens, chief executive officer of Wichita-based commercial real estate firm NAI Martens.
Towne West Square, one of Wichita’s largest enclosed malls, is owned by Simon Property Group spinoff Washington Prime Group, a publicly traded real estate investment trust. The 95-plus retailers there include anchor tenants JC Penney, Dick’s Sporting Goods and the Dillard’s Clearance Center, Regal-owned Movie Machine theater and specialty stores like Bath & Body Works, Finish Line, Rue 21 and Victoria’s Secret.
But several of the spaces are vacant.
Malls across the country have lost major retail tenants — and some have shuttered completely — in recent years.
In the past four years, Towne West has lost two major anchor tenants. The Convergys telecommunications and insurance call center replaced the Sears department store after Sears Holdings closed it in December 2014. Last year, the mall’s largest tenant, Dillard’s, turned one of the two retail store spaces it occupied into a clearance outlet and closed the other.
The larger of the two spaces still sits empty.
A fake news story claiming Towne West Square’s owner was shutting down the mall and preparing for bankruptcy appeared on social media last summer. Washington Prime Group spokeswoman Kimberly Green said then that there were no plans to close Towne West Square.
In an email Wednesday morning, she said she could not speak about the foreclosure filing or the mall’s future.
“During the special servicer process we are not able to comment,” Green wrote.
Towne West Square LLC originally borrowed the $51 million from Bank of America in May 2011, according to the foreclosure filing.
Under the terms of the loan agreement, the company is required to deposit $27,813 into a leasing reserve account that pays for tenant improvements and $4,079 into a replacement reserve account — for repairs and improvements to mall property to keep it in good condition — monthly when the balances fall below certain amounts.
Earlier this year it failed to pay the full amounts due, causing a loan default, the foreclosure filing says. The bank notified Towne West Square LLC of the problems in an April 6 letter and demanded deposit of the money within 10 days.
In a May 7 follow-up letter, the bank announced that it was accelerating the loan and that Towne West Square LLC’s license “to receive, collect and make use of rents, profits and income of any other type” was revoked immediately.