By CHRIS CASKEY
The Union Democrat
A chunk of the Sonora Crossroads shopping center on Sanguinetti Road will go up for auction along with 17 others at a trustee's sale on Aug. 30.
The approximately 5.5-acre property includes Big Lots, PetSmart and Joann Fabric and Craft Store, as well as a portion of the center parking lot.
According to the notice of trustee's sale submitted to the Tuolumne County Recorder's Office, the property's primary owner DDR MDT MV Sonora is in default for about $179.5 million in outstanding obligations tied to 18 properties. The other properties are all around the state of California, and the sale will take place in Contra Costa County.
DDR MDT MV Sonora is a subsidiary of Developers Diversified Realty, a Beachwood, Ohio, company that specializes in commercial real estate. According to the company website, they own and manage around 450 mostly retail properties in the United States and Brazil.
Records filed with the county show the default coincides with the real estate bubble and crash from the past several years, which hit commercial markets as well as residential.
DDR and other investors purchased the property during a market high in September 2005, paying approximately $9.4 million. The notice of sale, which lists all 18 properties, shows all but one were purchased at the same time. Property records show the current assessment for the Sonora property to be approximately $3.9 million.
"It's nothing extraordinary, just part of the new normal I guess," said county Assessor-Recorder Ken Caetano. "Because properties have declined in value."
Caetano said commercial leases like the ones connected to the property usually continue under the new ownership in trustee sales, should a bidder purchase the properties, meaning it will not likely affect the businesses on the site.
A message left with DDR corporate headquarters from The Union Democrat was not returned in time for this story. However, Larry Cope, the executive director for the Tuolumne County Economic Development Authority, pointed out that DDR only holds a portion of the mortgage and allowed the property to go into receivership a few years ago.
Cope said commercial properties in default tend to be "a little more stable" than in the residential market, as generally new investors who purchase the property can find renters at lower rates. In this case, that's especially true because all three units have residential tenants with multi-year leases.
"Whoever will get it … will actually be in good shape for the next 10 years," he said.
In this case, it could be another private investor or group of investors, or it could be the same company and investors looking to purchase the properties at a lower price to wipe away the debt. Sometimes these defaults are strategic moves, he said, and sometimes they're necessary.
"It's not too unusual, and even happens in good times," Cope said.