Promenade Shops at Centerra in foreclosure

LOVELAND – A notice of election and demand was filed against The Promenade Shops at Centerra Monday, after the owner, Centerra Lifestyle LLC, failed to reach an agreement with the lender to extend or refinance a $112 million construction loan.

“It’s definitely not because of poor sales performance at Promenade Shops or missed loan payments,´ said Doug Hill, chief operating officer of McWhinney, the Loveland-based developer that provided the land for the 700,000-square-foot lifestyle center east of Interstate 25.

Originally issued in 2004 by a group of banks led by KeyBank, the current loan came due this year. An NED is the first step in the foreclosure process. While McWhinney is a half owner of the Promenade Shops, according to Hill, the loan is a non-recourse loan and this filing does not affect any other Centerra properties.

“We believe the nationwide tightening of the credit markets caused by the global financial crisis is one of the participating factors in the foreclosure by the lender,” Hill said in a prepared statement. “In years past, we believe this would have easily gone to the next round of financing because Promenade Shops performs well. But the credit market has largely dried up. The financial crisis has completely changed today’s banking and long-term real estate financing environment.”

The economy has also changed the retail sales environment, with sales tax collections down throughout Northern Colorado this year. The Promenade Shops’ tax collections were down nearly 4.5 percent through September compared to last year, according to city reports.

Centerra Lifestyle LLC is managed by Poag & McEwen, headquartered in Tennessee. Poag & McEwen has developed seven lifestyle centers across the country, including the Promenade Shops at Briargate in Colorado Springs, and has three new developments under way, according to its corporate website. A call to corporate headquarters was not returned in time for this report.

“There’s no reason to expect any change in day-to-day operations of the specialty shops, restaurants, entertainment venues and other amenities at Promenade Shops,” Hill said.

Hill added that the action will not have any directly foreseeable impact on the Master Financing Agreement between Centerra and the city of Loveland, nor on regional improvements now under way at Interstate 25 and Crossroads Boulevard and at U.S. Highway 34. Those projects continue as planned. Calls to the city of Loveland finance department also were not returned.

“Although unfortunate, the foreclosure in no way impacts Centerra’s or McWhinney’s financial condition,” Hill said, adding that most of McWhinney’s operating properties have long-term permanent financing.

Hill expects the foreclosure process to take three to five months to resolve, and that it is likely that KeyBank will place the Promenade Shops on the market sometime in the future.

“As with any opportunity, should it arise, we would be willing to explore it,” he told the Business Report Daily when asked if McWhinney would be interested in buying the Shops out of foreclosure.

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