The mortgage on half-empty Merrymeeting Plaza in Brunswick has been referred to a debt collector out of concern that the shopping center’s owner might walk away.

But the owner, Massachusetts-based WS Development, said it has no intention of defaulting on the $24.4 million loan and is in talks to bring new tenants into the plaza.

The struggling retail development at 145 and 147 Bath Road, anchored by a Shaw’s grocery store, has lost numerous tenants in recent years including Famous Footwear, Day’s Jewelers, Little Bambinos, Old Navy, Fashion Bug and Borders.

Another tenant, GameStop, plans to close its Merrymeeting location this month.

The shopping center is only 58 percent occupied, according to research analyst Sean Barrie of New York-based Trepp LLC. The owner has reported to its loan servicer that the plaza is losing money, he said.

“The borrower has requested to transfer the loan to (a) special servicer as the property has been underperforming and is unable to generate sufficient cash flows due to low occupancy levels and upcoming lease expirations,” states a loan status report Barrie provided to the Press Herald. A special servicer is a company hired to collect on a mortgage that is in default or deemed to be at risk of default.

Companies such as Trepp follow the repayment progress and prospects of loans that have been pooled together and sold in pieces, or tranches, to investors in commercial mortgage-backed securities. Information about the health of each loan is used in determining the investment grade of the securities. The status report expresses concern that WS Development might be about to default on the mortgage, even though it has yet to miss any payments. However, WS Vice President of Development Louis Masiello said the company has never stopped making payments on a mortgage in its 25-year history.

“We do not have an intention of walking away from this property,” he said.

In fact, the company is in various stages of securing new tenants for the more than 50,000 square feet of vacant space at Merrymeeting, he said. Masiello said he could not disclose the names of any incoming tenants until an official announcement is made.

It is taking multi-tenant retail property owners in Maine longer to recover from the Great Recession than owners of office and industrial properties, particularly in smaller markets such as Brunswick, said Charles Craig, a commercial real estate broker with NAI The Dunham Group in Portland.

Merrymeeting and its next-door neighbor, Cook’s Corner, both have been dealing with high vacancy rates recently.

There is a domino effect that occurs sometimes when one or more tenants leave a shopping center, Craig said, which may be contributing to the ongoing loss of tenants at Merrymeeting.

“It can snowball on you,” he said.

The overall vacancy rate for retail properties in Brunswick was 16.4 percent in January, according to a presentation by Mark Malone of Malone Commercial Brokers at a recent Maine Real Estate & Development Association conference.

The vacancy rate for retail properties in greater Portland was 3.7 percent, Malone said.

Craig said two factors specific to Brunswick have made it more difficult for the two shopping centers to replace tenants that have relocated or closed.

Both shopping centers were booming before the closure of the Brunswick Naval Air Station in 2011 and the 1997 construction of the Coastal Connector between Interstate 295 and U.S. Route 1. The Brunswick-Topsham bypass has diverted a significant amount of traffic away from downtown Brunswick and into Topsham and its thriving Topsham Fair Mall. Some of Merrymeeting’s former tenants have relocated to Topsham.

Masiello disagreed, saying that neither the base closure nor the bypass have had a significant impact on Merrymeeting. What has been significant is the number of major tenants whose parent companies have declared bankruptcy and closed some or all of their stores, he said. Those include Coldwater Creek, Fashion Bug and Borders.

“This shopping center has suffered from bankruptcies,” he said.

Built in 1992 and renovated in 2004, Merrymeeting has been through previous periods of high vacancy and always has recovered, Masiello said, adding that his company takes the time to seek out tenants with good long-term prospects.

Brunswick shoppers can expect to see the center bring in some new retailers very soon, he said.

“We are on the cusp of re-enlivening it,” Masiello said.

 

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