Westfield Broward Mall among largest delinquent retail loans in South Florida
South Florida Business Journal
Major retail centers across South Florida, including some prominent malls, are struggling to pay their mortgages.
Business closures and Covid-19 safety restrictions have led to many tenants missing rent payments. A Business Journal review of delinquent loans held on the commercial mortgage-backed securities (CMBS) market revealed a dozen South Florida retail properties were delinquent on their CMBS loans as of mid-July.
According to CMBS records, the Westfield Broward Mall in Plantation was 60 days past due on its $95 million mortgage.
The notes by the CMBS special servicer say the mall owner has requested relief related to the Covid-19 pandemic, and the lender is working with the borrower towards a possible solution.
The mall is owned by Unibail-Rodamco-Westfield, one of the largest mall owners in the world.
“As a result of the Covid-19 pandemic, like many businesses, we are in the process of renegotiating the relevant aspects of our debt service agreement on the property,” the management of the Westfield Broward Mall stated. “The center continues to operate to serve the Broward community.”
Not all of the tenants in the Westfield Broward Mall are open.
Regal Cinemas, its largest tenant with 55,500 square feet, has been closed since March 17 due to the pandemic. The parent company of New York & Co., which has 8,600 square feet there, is in Chapter 11 bankruptcy and has warned it will close many of its stores. The Plantation location remains open.
The Westfield Broward Mall was 89% occupied at the end of 2019.
The other South Florida mall on the delinquency list was the Southland Mall in Cutler Bay with a $65.2 million mortgage.
There’s a pending foreclosure lawsuit against the borrower, Southland Mall Properties, an affiliate of Investcorp and Gumberg Asset Management. The mall owner declined comment.
According to the CMBS special servicer notes, the occupancy rate of the Southland Mall dropped to 74%, but operating expenses increased 17% during the pandemic. The lender received offers from third parties to buy the loan and various workout strategies are being considered.
The loan covering the Saks Fifth Avenue building at the Dadeland Mall is more than 90 days delinquent, according to CMBS records. The $846.2 million mortgage covers 10 Saks Fifth Avenue and 24 Lord & Taylor-anchored stores across the county. The borrower is an affiliate of Hudson Bay and Simon Property Group.
Simon Property Group, which owns most of the Dadeland Mall property, didn’t respond to a request for comment.
Joe Montgomery, senior VP with Colliers International Florida, said many malls were already under pressure before the pandemic as outdated retailers closed or filed bankruptcy. Many department stores, such as Lord & Taylor, Neiman Marcus, and JCPenney are in Chapter 11 restructuring.
Part of the issue is more consumers are buying goods online, and the pandemic has accelerated that trend, he said.
“This environment is particularly challenging for malls and mall owners,” Montgomery said.
“The acute pressure of Covid is accelerating that demise, but at the same time, it creates opportunities. As soon as the Covid threat leaves us, and it will, we will see a resumption of commerce and consumption.”
Malls that offer value-oriented retail and memorable experiences will rebound the fastest, he said.
In the short term, mall owners will count on lenders to work with them. Montgomery said most CMBS special servicers are being reasonable given the circumstances of the pandemic.
Another trouble spot for South Florida retail is South Beach. Three delinquent CMBS loans cover properties in that area, two on Lincoln Road and one on Ocean Drive.
Montgomery said rent peaked at an average of $300 per square foot in 2018 and was down to around $200 per square feet prior to the pandemic. He expects loan servicers will work with borrowers because they recognize the long-term value of retail in Miami Beach.
“It’s temporary. This is a false environment we are in,” Montgomery said. “We don’t have any doubt that Lincoln Road, and Collins Avenue, and Ocean Drive will recover very quickly once Covid ends and tourism resumes.”
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South Florida Business Journal