Starwood loses control of another mall in default

Last payment on $85M loan for Joliet Mall outside Chicago was in March

Barry Sternlicht, Louis Joliet Mall (Credit: Google Maps and Cindy Ord/Getty Images for 1 Hotels)
Barry Sternlicht, Louis Joliet Mall (Credit: Google Maps and Cindy Ord/Getty Images for 1 Hotels)

Starwood Retail Partners is giving up on one of its suburban Chicago malls, handing over the keys to its lender after first defaulting on a loan payment in the spring. The move comes two months after parent company Starwood Capital Group lost control of a seven-property regional mall portfolio.

The Chicago property is the nearly 1 million-square-foot Louis Joliet Mall. Starwood last made a payment on its $85 million CMBS loan in March, and is over 90 days past due. The loan went into special servicing in May.

According to the latest report from Trepp, Chicago-based Starwood Retail is in negotiations for a deed in lieu of foreclosure or a foreclosure sale.

It has been a rough couple of years for the Joliet Mall, which is about 40 miles southwest of Chicago. One of its anchors, Carson’s, closed in 2018 and a year later, the Sears there shut down. The 40-year-old mall’s surviving anchor retailers, JCPenney and Macy’s, are facing severe problems of their own.

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The mall was last appraised at $131.8 million in 2012, when Starwood Retail acquired it and the Chicago Ridge Mall as part of a larger deal. Barclays provided the $85 million loan in 2012, records show.

The Joliet Mall loan is part of CMBX 6, a mortgage derivative index that is heavily exposed to debt tied to retail and mall loans. It has become a popular way for investors such as Carl Icahn to short regional shopping malls.

Starwood declined to comment through a spokesperson.

As the pandemic has stretched into months, more owners have sought to give up on struggling malls, especially those with CMBS debt that is tricky to restructure because of covenants the servicers have with bondholders. Brookfield Properties is seeking to hand over the keys on a $90 million CMBS loan on its mall in Florence, Kentucky, while Namdar Realty has requested a deed in lieu of foreclosure for a $33 million loan backing a mall in Saginaw Township, Michigan, according to Trepp.