Mall owners again file for bankruptcy protection days before sale

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WALLA WALLA -- The owners of the defunct Blue Mountain Mall property have filed for bankruptcy in a move that postpones another auction proceeding that had been scheduled for the end of this week.

Walla Walla Town Center LLC filed for Chapter 11 business reorganization May 17 U.S. Bankruptcy Court in Seattle. That filing seeks protection from creditors while the business owners devise a plan for reorganization.

The retail property had been slated for the auction block May 25 after creditor Key Bank initiated foreclosure proceedings.

Walla Walla City Attorney Tim Donaldson, who is working on a separate judgment on behalf of the city for Walla Walla Town Center, said the move by the limited liability company postpones the sale.

It's the same process that has taken place in the past as creditors or debtors have attempted to sell the partially demolished property in an effort to get some of the money that is owed to them.

As was the case in 2010, owners filed an emergency bankruptcy filing, effectively delaying the sale so they can reorganize financially.

Donaldson was skeptical that a reorganization has any merit. He said Walla Walla Town Center has not put any money into the property for months -- if not longer.

Overdue tax bills and local improvement district payments on the property were covered last November and then again early this year by Key Bank. The company has paid more than $1 million toward the cause.

In previous bankruptcy filings Key Bank had been listed as having been pledged the $10.5 million note for acquisition of the property.

That's likely why the company stepped forward to cover the costs, Donaldson had said. But without receiving payment, it was Key pursuing foreclosure this time.

Donaldson said he believes the bankruptcy filing is a "delay tactic."

Redevelopment of the retail property from an open-air shopping center began in 2008. By summer that year contractors had walked off the job when they went unpaid.

Owners later said financing plans fell through in the wake of the economic climate. The property has been left in a state of partial demolition, and the city obtained at a judgment to enter the property for cleanup of hazards.

Donaldson said he plans to pursue a judgement against the owners to recover the city's costs for that work.

The bankruptcy filing lists Greg Erickson as the managing member of Walla Walla Town Center LLC. Erickson is reportedly the son-in-law of developer Winston Bontrager, who is believed to be the principal behind Walla Walla Town Center. The company is represented by Seattle attorney Larry B. Feinstein.

Since work on the mall stopped and the site has been fenced off, the Sears store adjacent to the property this year closed in what the national retailer called a retrenchment that included the closing of more than 100 underperforming Sears outlets across the country.

But many in Walla Walla, including some city officials, have speculated the local Sears store might have remained open had the mall shopping area been more presentable to customers.

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