Taubman to turn over Atlantic City mall to its lender

New York City Taubman Centers plans up to $169 million of write-downs this quarter on shopping centers in Atlantic City, N.J., and Richmond, Va.

Taubman plans to turn over to its lender The Pier Shops at Caesars, a luxury mall in Atlantic City, N.J., as the economic downturn continues to take a toll on the East Coast gaming capital.

Taubman said net operating income from The Pier Shops, which is on the boardwalk, was no longer sufficient to cover debt service on the asset's non-recourse mortgage and that it was "in the best interest of the company to discontinue its financial support of the center." It said it planned to begin talks with the lender.

Taubman, which has 77.5% equity in the property, said it would continue to lease and manage the 282,000-sq.-ft. mall if its lender agreed. The center is about 80% occupied.

"In the past year, traffic has not met expectations due to a weakened economy and the challenges of the significant new gaming competition in Pennsylvania," Robert S. Taubman, chairman, president, and CEO of the Bloomfield Hills, Mich.-based real estate company said in a statement. “This is underscored by the recently released August gaming results.”

Atlantic City’s gambling revenue fell 16% in August as casinos grappled with the industry’s worst slump on record. Also, in May, Las Vegas Sands opened a casino in Bethlehem, Pa., that industry experts say may be diverting some gamblers from Atlantic City.

Taubman is also taking down a write-down on Regency Square in Richmond, Va., an 820,000-sq.-ft. shopping center. Some two-thirds of its book value will be eliminated. Taubman bought the 34-year-old property in 1997.