A partnership comprising Continental Realty Co. principals has emerged from bankruptcy protection, ending a nearly yearlong fight for control of the Reisterstown Road Plaza.
Under partnership Reisterstown Plaza Associates' settlement late Thursday with lender Aetna Casualty & Surety Co. and other creditors, the affiliate of the Towson development firm will retain ownership of the shopping mall.
Nationwide, only 3 percent of all Chapter 11 reorganization cases are resolved in favor of the debtor: In most cases, the U.S. Bankruptcy Court allows lenders to foreclose on properties where loans have become delinquent, or the partnerships controlling the projects are liquidated.
"The owner is very happy with the outcome," said Stephen F. Fruin, a Whiteford, Taylor & Preston attorney representing the partnership. "The agreement gives the plaza the operating capital to remain competitive into the next decade."
Reisterstown Plaza Associates sought Chapter 11 protection on behalf of the mall last November, in response to a foreclosure lawsuit filed by Aetna. The Connecticut-based insurer claimed that the mall was behind on a mortgage payment owed as part of a $24 million loan made in March 1986.
The partnership, which had attempted to restructure its debt with Aetna and lower its 11 percent interest rate, contended that it could not meet debt service obligations and effectively maintain the property. Reisterstown Plaza Associates had purchased the 540,000-square-foot mall on 55 acres in Northwest Baltimore in March 1980.
Under the agreement, Aetna will lower the partnership's loan principal from $22.2 million to $16 million and its interest rate to 9 percent, according to court documents. In exchange, the partnership will contribute $425,000 to the property, and make $8 million in capital improvements before 2005. Continental Realty, which controls a real estate portfolio valued in excess of $300 million, also will be retained to manage the mall.
"This was a consensual plan of reorganization that was agreed to by both parties and the court," said Louise Axelson, an Aetna spokeswoman. "We're pleased with it, and as far as we're concerned, the loan is performing again."
Mall opened in 1962
Reisterstown Road Plaza opened in January 1962, but fell on hard times when anchor tenants Stewart's, Hochschild Kohn, the Hecht Co. and Food Fair departed or closed.
When the partnership bought the mall, it was plagued by vacant space, uncollected rents, a lack of security, changing demographics, deferred maintenance and heightened competition from the Owings Mills Mall, Towson Town Center and the Security Square Mall.
Since then, Reisterstown Plaza Associates has invested more than $12 million to upgrade the 6512 Reisterstown Road property, and lured new anchors such as Caldor, Hechinger's, Burlington Coat Factory and Food King.
The partnership also converted vacant retail space into 110,000 square feet of office space, at a cost of $3.3 million. The offices are now occupied by two state agencies.
Nearly all leased
As of April, the mall was 98 percent leased to 90 tenants, and appraised at between $13.25 million and $15 million, according to U.S. Bankruptcy Court records.
The mall is expected to generate average cash flow of $2.8 million annually for the next decade.
"In the end, everybody was realistic in terms of what a property like this could do," Mr. Fruin said. "And it will do well with reasonable debt service and good management."