Yorktown mall’s financial future cloudy with massive mortgage coming due

The Lombard shopping center’s loss of some big boxes could hurt its chances of landing new financing
November 28, 2018 04:00PM

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The Yorktown Center shopping mall in Lombard faces an uncertain financial future as its owners look down the barrel at a $114 million loan balance coming due.

New York-based private equity firm KKR and its partners own the 1.4 million-square-foot mall at Butterfield Road and Highland Avenue, and in March they’re on the hook to pay the massive loan balance to special servicer Key Bank, which manages troubled loans, according to Crain’s.

KKR and a group led by California-based Pacific Retail Capital Partners paid $196 million for Yorktown in 2012, and two years later refinanced it with $185 million in debt, including a $133.7 million loan that’s now coming due.

Yorktown’s $5.8 million net cash flow in the first half of the year was enough to cover the $2.7 million in debt payments. But KKR and its partners only have a few months to come up with the balance, as they already exhausted two options to extend the maturity date for a year.

Experts told Crain’s it’s a difficult environment for retail landlords to find financing, with lenders worried retail income will decline and property values fall.

Yorktown has, like many other malls, struggled with vacant storefronts in the online shopping era. Retailer Carson’s closed its 218,000-square-foot department store and 46,000-square-foot furniture store in Yorktown, while the shuttered Sports Authority left a 47,000-square-foot hole in the mall.

The vacancy rate at malls nationwide hit a seven-year high in the third quarter, and average mall rents slid for the first time since 2011. In July, Chicago-area retail vacancy hit its highest point since 2010.

Yorktown might have to get creative to fill the vacant space. Other malls in the same situation have turned to apartments, medical offices and coworking spaces to fill voided stores[Crain’s]John O’Brien