COVID-19 was the straw that broke the “malls” back, as the pandemic has accelerated the decline of the suffering sector. Analysts say that even when the pandemic comes under control, the glut of department stores and other retail tenants struggling with lower sales will continue to haunt the industry.
- Dig Deeper: Now, malls that were purchased within the past 10 years are underwater, leading owners to return properties to their lenders at a record pace. But some lenders don’t want struggling properties on their balance sheet and have batted them back by extending their loans, WSJ noted.
- Why it matters: Many malls purchased within the past 10 years are now underwater, leading owners to return properties to their lenders at a record pace. But some lenders don’t want struggling properties on their balance sheet and have batted them back by extending their loans.
- By the numbers: Appraisers pegged the Palisades Center Mall’s value at $425 million, which is less than half of the $881 million that the mall was valued at in 2016, when owner Pyramid Companies received a $388.5 million mortgage. The debt behind 1.8M SF mall carried an LTV ratio of 48 percent and was fully leased at the time. It has now since seen its occupancy rate drop to 83 percent, with large-footprint tenants JCPenney, Lord & Taylor and Bed, Bath & Beyond closing their locations.
- Not alone: The 5.6 million-square-foot Mall of America was reappraised in August, resulting in the value dropping to $1.94 billion, down from $2.31 billion. More troubling though, is the fact that two publicly listed mall owners, CBL Properties and Pennsylvania REIT, recently filed for chapter 11.
- Where this is all headed: Simon Property Group, the biggest mall owner in the U.S., has been in talks with Amazon to turn some of its anchor department-store spaces into Amazon fulfillment centers. For the e-commerce giant, more fulfillment centers near residential areas would speed up the crucial last mile of delivery. For Simon, turning over what was once prime mall space to fulfillment centers shows it would be willing to relinquish an essential way to bring in more mall traffic to secure a steady tenant. [TRD+WSJ+S&P Global]