Starwood faces Chicago mall challenge again

Bed Bath & Beyond closure hits property owner with big new vacancy months before $77M loan maturity

Starwood Capital Group's Barry Sternlicht with 9650 South Ridgeland Ave
Starwood Capital Group's Barry Sternlicht with 9650 South Ridgeland Ave (Google Maps, Getty)

Bed Bath & Beyond’s store closures deal another blow to Chicago Ridge Mall, where owner Starwood Retail Partners faces an impending loan maturity it’s already put off once.

The Chicago Ridge store that spans about 70,000 square feet is one of five stores closing in the Windy City’s suburbs as the retail chain tries to avoid Chapter 11 bankruptcy and Starwood’s new debt due date approaches.

Starwood’s mortgage and the $77 million loan tied to it on the 868,000-square-foot mall was originally set to mature in July 2022. The debt is now due in six months after a loan modification the landlord negotiated with Atlanta-based lender Trimont Real Estate Advisors to allow the mall owner to hang on to the property.

Its unclear how Bed Bath & Beyond’s store closure impacts Chicago Ridge Mall’s rental revenue, and a spokesman for Starwood declined to answer questions about the implications. 

It does, however, leave a large hole to fill for Starwood, Trimont or any other potential owner to refill with a tenant amid tough times for mall players. Several mall landlords in the Chicago area are repositioning their properties by adding residential density through large development projects set to cost tens if not hundreds of millions of dollars.

Bed Bath & Beyond secured investor backing to raise more than $1 billion to stave off an immediate bankruptcy filing, the Wall Street Journal reported Tuesday, though its planned store closings haven’t been reversed.

Miami Beach-based Starwood struggled to find new financing to pay off the mortgage at its original maturity date due to the property’s declining value, which stemmed partly from its net cash flow falling by nearly 50 percent during the pandemic from 2016 marks, according to published reports. The mall’s net cash flow fell to $6.7 million in 2020 from $12.5 million in 2016, before performance improved in 2021 with a net cash flow of $8.1 million.

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Including Bed Bath & Beyond, the mall’s occupancy rate rose to 80 percent in 2021, with AMC, H&M, Michaels and Aldi among its other tenants. The mall already lost big-name tenants Carsons in 2018 and Sears in 2021, although a Dick’s Sporting Goods opened in the lower level of the former Carson’s space to bring some revenue back to the property.

The asset was valued at $46 million last year, 58 percent of the mortgage balance and a steep drop from the $129.7 million it was appraised at in 2012, when Starwood borrowed the money.

If Starwood isn’t able to maintain ownership, Chicago Ridge won’t be the first mall it had to hand to a lender in the area.

The firm lost control of the Louis Joliet Mall in October 2021, turning it over to a lender after defaulting on payments for an $85 million mortgage on the property. In June, Starwood lost the Arboretum of South Barrington after defaulting on a $67 million loan, two months after losing the Promenade Bolingbrook shopping center.

The other four Bed Bath & Beyond stores slated to close in the Chicago area are in Wilmette at the Edens Plaza shopping center that was purchased last year by WS Development for $110 million, and in Geneva, Crystal Lake and Forest Park. 

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