Deal set in sale of former Sears, Penney’s in Chattanooga’s Northgate Mall

Staff photo by Mike Pare / A Halloween-themed venture is operating at the former Sears store at Northgate Mall. A federal judge has agreed to a deal to sell interests in the property to two local entities.

A federal judge in Georgia may have helped clear the way for the future reuse of the former Sears and J.C. Penney stores at Northgate Mall.

U.S. District Court Judge Steven D. Grimberg of Atlanta has agreed to a proposed sale of interests in the properties which were held by a fund that was run by John J. Woods. He's the former Chattanooga Lookouts investor who last year was accused by government regulators of operating a massive Ponzi scheme.

Business entities run by Chattanooga developer Bassam Issa and CBL Properties each are purchasing parts of the two mall properties held by the fund that they didn't already own, according to court filings. They'll both hold 50% shares when the deal closes, filings show.

Also, Issa's company is buying the 70% interest he doesn't own in 1.5 acres of vacant commercial land behind Logan's Roadhouse near the mall, the filings said.

Issa said the deals for the mall properties will help in the redevelopment of the former anchor stores and the parking lots around them.

"Hopefully everything will go as usual now to develop the properties like any other properties," he said in a telephone interview.

Stacey Keating, vice president of corporate communications for mall owner CBL Properties, said in an email that officials see the purchase as "a good opportunity to release or redevelop the sites."

She said CBL, the Chattanooga company that owns Hamilton Place mall and is one of the nation's largest shopping center operators, is working on plans to redevelop the property.

Issa said the two former stores and the adjacent lots cover about 25 acres.

According to court filings, the purchase price for the fund's interest in all three of the sites is $100,000. But balances on loans for the properties as of July 12 were $1.72 million for Penney's, $3 million for Sears and $387,380 for the third location, filings show.

Also, court papers said a business valuation adviser for the court-appointed receiver in Woods' federal case found that the fund's interests in the properties have little or no value given the debt and because they have no operations or income.

In addition, the deal has a provision that if any of the sites are sold within a year from the closing, then the receiver shall be entitled to a portion of the net realizable proceeds equal to what the fund would have received, filings show.

The Securities and Exchange Commission in August 2021 alleged in a complaint that Woods (who lives in Marietta, Georgia, but grew up in East Ridge) had operated the Horizon Private Equity III fund with promises of 6% to 7% returns to investors for about a decade.

But the SEC in court filings alleged that investments Woods made in a number of companies and in real estate deals, several in the Chattanooga area, were worth far too little for there to be any realistic prospect of paying back investors their principal, much less the promised returns.

Woods in court papers has denied the allegations of running a Ponzi scheme and asked for a jury trial in the civil case. Woods has not been criminally charged.

His attorney said the SEC's claims don't meet the FBI's definition of a Ponzi scheme and that the fund's real assets would have been worth more than what it owed investors.

But the judge appointed a Charlotte, North Carolina, attorney to serve as a receiver and liquidate the fund with the proceeds to be returned to investors.

The Penney's property was occupied by the retailer until 2014 while Sears stayed on its site until 2019, according to a real estate adviser hired by the receiver. Both sites were sold after the anchors closed.

In 2020, the Hamilton County school board considered purchasing the former Sears for a school site as it also eyed the Penney's property. Board members ultimately decided against the move.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.