Rushmore Mall can't pay its loans, and the bank is moving to take the keys.
In legal documents filed last week in Pennington County, lawyers for Wells Fargo Bank have asked a judge to foreclose on the property and speed up the payment of the sprawling shopping center's $100 million in unpaid loans.
The mall's ownership team, a limited liability corporation called SM Rushmore Mall, defaulted on its payments in late May, according to a court filing. By waving the fiscal white flag, the mall — a 13-acre property that includes the mall itself and adjacent real estate, valued by the complaint at between $36 and $42 million — will now go into receivership.
In the meantime, the mall plans business as usual.
"Absolutely, customers should not expect to notice any differences," said Kimberly Green, spokeswoman for Washington Prime Group, the parent company of SM Rushmore Mall. Washington Prime Group is based in Maryland owns more than 100 malls across 30 states.
Attorneys for Wells Fargo and SM Rushmore declined to comment.
Court documents describe a meeting on May 4 between mall and the bank representatives in which the "loss of certain tenants at the property" was discussed as causing a financial strain on the mall's ability to pay its bills. According to terms of the loan agreement, only a written notice could constitute an "event of default."
After the meeting, Wells Fargo received written notice from SM Rushmore "indicating that the short flow in cash flow from the Property would result in a payment default by Borrower within two to three months."
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In a May 25 letter to SM Rushmore Mall, attorney Amy E. Hatch of Polsinelli Law Firm in Kansas City, counsel in this matter for Wells Fargo, writes that as a result of the mall's written admission "an event of default has occurred."
The complaint filed a month later asks Judge Jane Wipf Pfeifle in Pennington County "that a decree of foreclosure be entered" directing the sheriff to sell the property. If the 7th Circuit judge approves the plan, Wells Fargo will collect rent from tenants until a new owner can be found.
"While several outcomes are possible, as the process moves forward," said Green in an email, "Washington Prime Group plans to work closely with the special servicer."
Attorney Richard E. Huffman of Rapid City is appearing on behalf of SM Rushmore Mall LLC in the proceedings.
Rushmore Mall has been a shopping hub for western South Dakota since opening in 1979. But like many big-box stores, it has struggled in the last decade. In the past year, Rushmore Mall has lost anchor tenants Herberger's, Sears and the restaurant chain Fuddruckers. In 2014, legal filings show SM Rushmore Mall refinanced its loans with U.S. Bank, and Wells Fargo took over the mortgage.
Court documents also show in 2016 J.C. Penney underwent an expensive renovation. By 2018, the mall owed as much on two loans — $102 million — as it did when it split the original bank loan in 2014.
Rushmore Mall is, essentially, a real estate company. Its website lists more than 100 tenants — stores and restaurants including such chains as Sunglass Hut and Maurices — that pay rent to the ownership group, who in turn answers to their parent company, Washington Prime Group.
A second hearing between attorneys for Wells Fargo and Rushmore Mall will be held at 10:30 a.m. July 26. Judge Pfiefle is expected to hear motions, but as of Thursday morning no party has filed one.