Starwood venture risks fourth fumble of suburban Chicago mall

Landlord, in a joint venture with Westfield Group, owes $76M to lender after failing to refinance and extending maturity to this year

Starwood's Barry Sternlicht with Chicago Ridge Mall
Starwood's Barry Sternlicht with Chicago Ridge Mall (Getty, Google Maps)

A venture of Barry Sternlicht’s Starwood Capital Group is in danger of losing another big suburban Chicago mall to a lender, weeks after an investment firm scooped up a Joliet indoor retail asset at auction at a discount of nearly $50 million from a loan taken out by Starwood.

A joint venture of Starwood and Westfield Group had an $80 million loan against the sprawling Chicago Ridge mall in the southwest suburbs transferred to special servicing, a sign that the borrower is in danger of default, CRE Direct reported.

Starwood and Westfield’s loan has a remaining balance of $76 million, and the firms failed to get it refinanced last year, instead striking a one-year extension of the loan. About 569,000 square feet of the 868,000-square-foot mall at 444 Ridgeland Avenue serves as the loan’s collateral.

The borrowers have been marketing the property for sale, according to commentary provided by the loan’s servicer Wells Fargo to credit ratings agency Morningstar. The debt has been securitized and sold off to investors in financial markets since it was originally issued in 2012, when the property was valued at nearly $130 million, according to credit ratings agency Morningstar. Chicago Ridge Mall’s appraisal has tumbled since then, getting estimated at $66 million last year, according to the outlet.

It’s one of many Chicago- area malls that have plummeted in value following the rise of online shopping, which was amplified by the pandemic.

Sign Up for the undefined Newsletter

Chicago Ridge Mall generated $2.11 million in net cash flow in the first quarter of 2023, putting it on pace to make $8.44 million for the year, the outlet said. With a mortgage rate of 4.6 percent, that would be more than twice the amount needed to cover its existing debt payment. The property was 89 percent leased at the end of March, according to data from Trepp.

Starwood is at risk of fumbling a fourth Chicago-area mall in recent years with the Chicago Ridge Mall loan getting transferred to the loan’s special servicer, which was listed as PNC Bank’s Midland Loan Services when the debt was issued.

The Miami-based firm already gave up the Louis Joliet Mall in 2021, and now that property has a new owner after a Namdar venture snagged it at auction for $31 million, well below the $80 million loan Starwood had previously obtained on the property. Akin to the Chicago Ridge Mall, Louis Joliet Mall’s appraised value nosedived since its $131.8 million valuation in 2012.

Starwood also surrendered the Promenade Bolingbrook mall in 2022 and Arboretum of South Barrington in 2020 as those properties ran into financial trouble during the pandemic.

— Quinn Donoghue 

Read more