One of Lancaster County's biggest shopping centers is headed for foreclosure.
Bank of America is foreclosing on Red Rose Commons, the 463,000-square-foot outdoor center along Fruitville Pike in Lancaster city, according to a lawsuit filed in the Lancaster County Courthouse June 26.
The bank claims owners Red Rose Commons LP, a subsidiary of Blue Bell-based The Goldenberg Group, owes $24.8 million in outstanding principal on a $28.3 million mortgage signed in April 1999. The lawsuit demands $25.54 million, including legal fees and other costs.
Nothing in the foreclosure action indicates that the center will be sold or closed, but local municipal and school district officials say the foreclosure could impact tax revenues down the line.
The shopping center, opened in 1998, has seen its first two vacancies over the past year, with Linens 'N Things closing in December and Circuit City shutting its doors in March.
The Goldenberg Group is one of the biggest commercial real estate developers in the region, with shopping centers in Bensalem, Reading, Plymouth Meeting, Philadelphia, Lansdale and several towns in New Jersey. As of Friday, the company was still touting "leasing opportunities" at Red Rose Commons on its Web site,
www.goldenberggroup.com. Company spokesman Georges Lafontant did not return phone or e-mail messages seeking comment; an e-mail to Kenneth N. Goldenberg, founder, president and CEO of the firm, also was not returned.
"The Goldenberg Group may have its assets spread pretty thin; it may be that Red Rose Commons in particular isn't the problem, but it could be other shopping centers they own," said Christine Sable, a commercial leasing specialist in Manheim Township.
"In a normal economy, if you own a shopping center for 10 years or so you can go in and refinance, but you can't refinance these days because [property] values have dropped, rents aren't going up or you're getting less in rents," she said.
Commercial real estate nationwide is in the dumps, with about $700 billion in commercial mortgages that need to be refinanced by the end of 2010, according to testimony at a congressional hearing earlier this month. The "looming crisis" could lead to big losses for banks, force owners of commercial properties to declare bankruptcy, and ultimately hinder the economic recovery, according to Rep. Carolyn Maloney, a New York Democrat who chairs the Joint Economic Committee.
The Bloomberg financial news agency reported that nationwide there were 5,315 commercial properties in default, foreclosure or bankruptcy at the end of June, more than twice the number than at the end of 2008.
Red Rose Commons is Lancaster County's third-largest shopping center. The biggest — Park City Center — filed for bankruptcy in May.
Rockvale Outlets is the second-largest shopping center in the county.
Patrick Hopkins, chief financial officer for the City of Lancaster, said Red Rose Commons had paid its property taxes, totaling more than $260,000, for the year.
The stores at Red Rose Commons are treated as condominiums and assessed separately. Red Rose Commons LP/Goldenberg Group owns all but three of the stores; Weis Markets, Home Depot and FP1 5 LLC, owners of Olde Country Buffet, own their spaces in the shopping center, Hopkins said.
Hopkins doesn't believe the foreclosure would impact the city — unless the bank were to repossess the property and sell it at "fire sale" prices, resulting in a new owner demanding lower assessments. "But even then, that would take a while," he said.
The shopping center pays even more to the School District of Lancaster: Red Rose Commons' tax bill is $641,192 this year, said Matt Przywara, school district business manager.
The district just sent out tax bills a few weeks ago, and Red Rose Commons has not yet paid the levy, he said. "It is one of our largest commercial taxpayers," he said, and he worries that if the foreclosure got tied up in court, tax payments could be put in escrow — meaning the district wouldn't get the money until the dispute was resolved.
Other parties to the Red Rose foreclosure are LaSalle Bank N.A., acquired by Bank of America in 2007, and GMAC Commercial Mortgage Securities Inc.
Local real estate professionals say sales at Red Rose Commons are strong; both the Linens 'N Things store and Circuit City were among those defunct chains' best performers. In February, Goldenberg Group's David Mercuris told the Lancaster New Era the company had "a lot of interest" in the vacant stores, and the firm was "pretty confident that we can fill the spaces quickly."
But Sable noted that with Linens 'N Things and Circuit City in bankruptcy, "even if [Goldenberg] has tenants they want to put in there, they can't until the bankruptcies are ironed out."
She added: "I think Red Rose Commons is a strong center, but Lancaster County just isn't immune from what's going on in the rest of the country."
Gil Smart is associate editor of the Sunday News. E-mail him at gsmart@lnpnews.com, or phone 291-8817. 
