RECEIVERSHIP SERIES, PART 2: Vallco Fashion Park’s Double Distress

 

Part II: Rents and profits receivership — Vallco Fashion Park
 
DWC’s areas of expertise span many different property types, including direct experience with numerous retail centers. In a series of events relating to Vallco Fashion Park in Cupertino, Calif., DWC actually served as receiver not once, but twice, to preserve value for the property which occupied several dozen acres near Apple Inc.’s headquarters. 
 
During a time when Apple was still maturing in the late 1990s and occupied its former campus, Vallco Mall was a shopping hub for area residents and employees, having been built in the 1970s and updated over the years. Yet during this time of area transformation, the property owners found Vallco’s retail wasn’t well aligned with area demand and fell into default on their loan. DWC was placed as receiver. 
 
As is typical in a rents and profits receivership, DWC was tasked with overseeing all of the property’s management and leasing, as well as preservation of entitlements for the mall, which had dozens of tenants and anchors Macys, J.C. Penny and Sears. We coordinated with the city on a variety of issues and ultimately positioned the asset for sale netting a successful outcome for all parties at the time. 
 
Several years later, new owners faced a similar fate. By the early 2000s, Silicon Valley was maturing and the community was changing rapidly. With an undersupply of housing, again the property, now called Cupertino Square, found itself out of alignment with area need. DWC commenced its duty as receiver once again, overseeing entitlements, the management company, leasing activities and day-to-day operations. We helped to coordinate the repositioning options and prepare for another successful sale.
 
While Vallco’s problems stemmed from various factors, today’s retail properties are even more challenged due to an industry shift away from bricks and mortar, and changing consumer behaviors resulting from the COVID-19 pandemic. 
 
“Vallco’s troubles were symptomatic of what is going to be happening to hundreds of other malls over the next decade around our country,” said DWC Chairman and CEO Douglas Wilson. “Many experts have studied this space and have concluded malls are going to have to be repositioned. Having served as receiver for Vallco Mall twice, this is particularly applicable to what’s happening today.”