(This story, in slightly different form, originally appeared in Incisive Media’s Daily Business Review.)

PALM BEACH GARDENS, FL-Downtown at the Gardens, a high-profile shopping center in Palm Beach Gardens, has been hit with a $138 million foreclosure. The lawsuit comes about six months after a Boca-Raton group, Ashkenazy & Agus Ventures, purchased the mortgage note on the 350,000-square-foot center for an undisclosed price.

At the time of the sale, sources said the mortgage holder, TIAA-CREF, sold the note for about 35% of its original principal, or about $48 million. The note price was not disclosed in the foreclosure suit.

The lawsuit was filed last week in Palm Beach Circuit Court by BH AABE DATG LLC, an entity registered in Delaware in January that purchased the note. The company is a partnership between Ashkenazy and a Maryland investor, Brian Berman, according to county records.

The shopping center is owned by Institutional Mall Investors, a company co-owned by Skokie, Ill.-based Miller Capital Advisory and the California Public Employees Retirement System (Calpers), the second-largest U.S. pension fund. According to the lawsuit, the joint venture failed to make a monthly payment on the $137.6 million loan on June 1. As of June 6, the joint venture owed $138.1 million including interest and fees, the suit stated.

The joint venture acquired the mall in 2007 for at least $200 million from Palm Beach Gardens-based Menin Development, which built the 35-acre property along the PGA Boulevard east of Interstate 95 in 2004. The venture assumed a $140 million, 10-year-loan at the time of purchase. If the property is foreclosed on, the mall owners will lose an estimated $60 million to $90 million in equity invested when they bought the property two years ago.

Downtown at the Gardens, which is managed by the Simon Property Group, was considered one of the area’s more upscale shopping destinations when it opened in 2005. It it has been hit hard by the loss of several tenants, including the restaurant Rosa Mexicano. Current tenants include Cobb Theatres, Whole Foods Market and the Cheesecake Factory.

Tenants in the mall have complained about maintenance and cleanliness issues. One tenant has filed a lawsuit in Palm Beach Circuit Court, claiming the mall is deteriorating. One source familiar with the property, who requested anonymity, said he expects a friendly foreclosure in which BH AABE will take over the mall through a deed in lieu of foreclosure.

The center is the second Palm Beach County to be hit with a multimillion-dollar foreclosure in recent months. The 1.2-million-square-foot Palm Beach Mall in West Palm Beach, which lost Dillards and Macy’s as major tenants, in April was hit with a $55.4-million foreclosure by Wells Fargo, representing JPMorgan Chase Bank. The lawsuit was filed against Simon Property Group and DeBartolo Realty Partnership. A receiver has been appointed to oversee the mall operations and the foreclosure is pending.

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