Some mall owners have given up on trying to revive their struggling malls and pay off their debts and are now looking to hand over the keys to their servers.
Brookfield Properties and Namdar Realty are separately asking that they be allowed to divest their malls anchored JC Penney to special departments in order to avoid loan foreclosures, according to Trepp. The action is known as an “act in lieu”.
Brookfield is more than 90 days past due on its $ 90 million CMBS loan for the Florence Mall in northern Kentucky, according to Trepp. The property was sent for special overhaul in July. The special duty agent said he would continue discussions about the training, according to Trepp.
The mall totals 384,111 square feet and is anchored by JC Penney and Macy’s. The guarantee was valued at $ 158.6 million in 2012.
Namdar Realty has requested a deed in lieu of a $ 33.3 million loan to support a 450,000 square foot shopping center in Saginaw Township, Mich., According to Trepp. The mall, known as Fashion Square, was already struggling before the coronavirus since one of its mainstays, Sears, left the mall in 2019. JCPenney is currently the mall’s largest tenant with 34 % from space.
The loan has been over 90 days past due and Namdar has said he will “cooperate with a receivership,” according to Trepp. Namdar bought the property and assumed the debt of CBL Properties in 2016 for $ 66 million.
In a statement, a representative for Namdar confirmed that it will hand over the mall.
“Despite the team’s persistent rental strategies and countless efforts that have proven effective at other properties, Fashion Square Mall ultimately became unsustainable due to coronavirus-induced closures,” the representative said.
Brookfield did not immediately return a request for comment.
Brookfield and Namdar’s move could be a sign of things to come for mall owners.
The lingering impacts of the pandemic have caused a number of key tenants such as Neiman Marcus and Lord & Taylor file for bankruptcy, leaving malls with massive vacancies and few options to fill them.
The malls most likely to see new owners are those that CMBS debt. These loans are more difficult to restructure because of the restrictive covenants that the bondholders have with the managers, which means that many of these loans could default.
On Tuesday, CNBC reported that Brookfield, one of the nation’s largest shopping center owners, was planning to lay off 20 percent of its retail sales staff. The company said it would make cuts “to align with the future scale of our portfolio,” according to Jared Chupaila, CEO of Brookfield’s retail group in an internal document shared with CNBC.
It became one of the largest mall owners in the country when Brookfield Property Partners acquired Chicago-based GGP for $ 9.25 billion in 2018 and merged the assets into Brookfield Properties.
In September, Brookfield Property Partners and Simon Property Group agreed to buy JC Penney from bankruptcy in a deal valued at $ 1.75 billion. JC Penney is a key tenant in many Brookfield and Simon Property shopping centers.