May 18--The Palm Beach Mall in West Palm Beach is like any old house behind on the mortgage: The property has become a little neglected, with some bills not being paid.

"It's not so different from a divorce," said Peter Filomena, managing director of Reichel Realty & Investments in Palm Beach Gardens. "No one wants to pay the pool cleaner." Or, in this case, the mall's water and electric bills.

Earlier this month, the power and the water were nearly shut off to the 1.2 million-square-foot shopping mall because the utility bills had not been paid.

Florida Power & Light was so concerned about public safety, it notified West Palm Beach officials so that the city could arrange fire and police presence if the mall had to be evacuated. At the last minute, mall owner Simon Property Group of Indianapolis paid the electric bill.

That follows last month's filing of a $55.4 million foreclosure action against the retail landmark. The mall was sued for allegedly failing to pay on millions of dollars in loans due to J.P. Morgan Chase Bank. The lawsuit was filed by ORIX Capital Markets LLC on behalf of Wells Fargo Bank, which is the trustee for the J.P. Morgan Chase Bank loans.

Real estate experts say it's not unheard of for misunderstandings -- or even gamesmanship -- to occur when lenders and borrowers tussle over money. Neil Merin, chairman of NAI/Merin Hunter Codman in West Palm Beach, saw the trend back in the 1990s, when many commercial properties went into foreclosure.

But with Simon recently raising $600 million in debt financing, Merin noted that the nation's largest shopping center company is well able to pay on the $55.4 million loan -- if it wanted to.

"There's obviously a game going on here," Merin said.

Simon blames its loan servicer, ORIX Capital of Dallas, for the unpaid utilities.

ORIX is receiving tenant rents now that the property is in foreclosure. And Simon, in a statement, said it had "repeatedly" asked the servicer to pay the mall's expenses.

But ORIX officials said they had no idea the utilities weren't being paid. They insisted Simon is responsible for paying expenses, including utilities, while the property is in foreclosure.

Russ Bornstein, senior vice president with Grubb & Ellis in Boca Raton, wondered if Simon had stopped paying the utility bills as a way to force out remaining tenants.

"I don't know any other reason why they would do that," Bornstein said. "I haven't seen this since the late 1980s or early 1990s." Others were harsher in their assessment. "Simon is not a fly-by-night entity," said Steven Ellison, a West Palm Beach attorney specializing in commercial foreclosure litigation. "So for them to say, 'We've lost control of our rents, so we don't have to pay any expenses' is exceptionally shortsighted -- and dangerous.

"Until a court appoints a receiver, it's still a borrower's obligation to pay the necessary expenses," said Ellison, of the Broad & Cassel law firm. "I don't see this is a bank issue."

Alexandra Clough writes about the economy, real estate and the law. For more of her coverage, read The Source on Sundays, at palmbeachpost.com/business. Contact her at alexandra_clough@pbpost.com.

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