Brookfield Properties scores $265M refi on Rancho Cucamonga mall

Brookfield Properties and the Queensland Investment Corporation are on the brink of refinancing part of the sprawling Victoria Gardens mall in the Inland Empire, a 92-percent leased bright spot across its retail portfolio. 

Brookfield and QIC are closing a $265 million loan to refinance about 700,000 square feet at the roughly 1.2 million-square-foot mall in Rancho Cucamonga, according to reports from ratings agency Moody’s. Brookfield did not respond to a request for comment. 

Barclays and JPMorgan are originating the loan, and then packaging the debt into a commercial mortgage-backed securities deal, according to Moody’s. The deal is set to close in July. 

The five-year, floating-rate loan has an interest rate equal to the secured overnight financing rate plus 2.35 percent. However, the borrowers were required to buy a rate cap on the loan, which prevents the interest rate from going above 6 percent, or a rate that will ensure Brookfield is making at least 1.5 times what is needed to service the debt — whichever is lower. 

A five-year rate cap, with a limit of 6 percent, costs about $1.7 million, according to Chatham Financial data. The loan will return about $51 million in equity back to Brookfield. 

The property is tied to another mortgage, according to Moody’s, plus mezzanine financing, though details were not disclosed. 

QIC acquired a stake in the mall in 2017, when it took over interest in ten regional malls from Forest City Realty Trust. Brookfield came in a year later, when it acquired Forest City altogether for $11.4 billion. 

Some of Brookfield’s retail properties have been struggling over the last year, in light of tepid leasing and high interest rates, which have suppressed incomes and hiked monthly debt bills, respectively. 

Mid-last year, about $1 billion worth of loans tied to Brookfield-owned properties were in distress — Brookfield defaulted on a $225 million loan tied to a mall in North New Jersey, leading to foreclosure, and was delinquent on loans tied to at least seven other properties. 

But in recent months, Brookfield has refinanced a number of its malls, in an effort to pay down some of its debt and get some equity back into its hands. 

In December, Brookfield scored a $180 million CMBS loan to refinance Stonestown Galleria in San Francisco, which the firm is looking to redevelop part of into housing. In May, Brookfield refinanced three malls along the East Coast with a $345 million loan. 

The Rancho Cucamonga mall also seems to be a light for Brookfield, given the high occupancy and the fact that property incomes have been steadily rising over the last five years. The property’s net operating income rose to $32 million at the end of 2023, up 6 percent from the year prior and 15 percent from before the pandemic, according to the Moody’s report.

And Brookfield and QIC have been willing to pump money into the mall. Since 2020, the firms have spent almost $26 million renovating and updating the property.