Washington Prime Group is on the brink of defaulting on an $85 million loan tied to a mall in Orange County.
The loan on the 1.2 million-square-foot Westminster Mall, located in the city of Westminster, has gone to special servicing for “imminent monetary default,” according to Trepp, citing comments from servicer Torchlight Loan Services. Morningstar Credit Analytics flagged the loan’s move to special servicing earlier this month.
Washington Prime declined to comment.
JPMorgan Chase provided the floating-rate loan in 2014 and packaged it into a commercial mortgage-backed securities pool, according to Trepp.
Washington Prime, which spun off from Simon Property Group in 2014, has struggled with dipping rental income and rising mortgage payments at the mall for the last few years, as interest rates have risen.
At the end of last year, the debt service coverage ratio on the loan, which compares income at a property to how much is needed to pay off debt obligations, was less than 1 — not enough to service the debt.
“The property is not cash flowing,” Morningstar DBRS wrote in a ratings note about the mall this month.
Net operating income was negative from January through September last year, with the borrower reporting negative $1.4 million in net cash flow, according to Trepp data.
Washington Prime was given an opportunity to pay off the loan in November, but didn’t, according to both Morningstar and Trepp. The loan is set to mature in April.
The mall, located at 1025 Westminster Mall, is leased to Target and JCPenney, along with Old Navy, Forever 21 and Designer Shoe Warehouse.
Macy’s owns its own store at the mall, as did Sears, until it went bankrupt in 2018.
Shopoff Realty Investments bought the now-vacant Sears store at the mall for $46.3 million in 2022, and plans to replace the store with 1,200 homes.