Related goes delinquent on $150M loan covering CityPlace West Palm Beach

Special servicer declined Related's attempt to work out a discounted payoff deal

Jul.July 11, 2016 05:15 PM

CityPlace in West Palm Beach (Credit: Stephen K. Hill) (Inset: Stephen Ross, Related Cos. founder and CEO)

Stephen Ross’ Related Cos. has officially gone delinquent on the $150 million in loans covering CityPlace West Palm Beach, marking the latest financial woe for the sprawling shopping center.

A recent list of delinquent loans released by Trepp, a commercial research company, shows Related’s two loans from commercial-mortgage backed securities totaling $150 million were the largest to go 90-days delinquent in South Florida during June.

Earlier this year, the latest signs of trouble emerged when CityPlace Partners — the mall’s ownership entity that’s headed by Related — had its two loans placed in special servicing with a company called C-III Asset Management.

According to Trepp, CityPlace Partners submitted a letter of hardship to its lender saying competition caused its occupancy rates to decline. The owners then suggested a “discounted payoff proposal” to resolve the delinquency. C-III declined.

Trepp’s statistics on the 698,472-square-foot property shed some light on CityPlace’s dilemma: The interest rate on CityPlace’s loan jumped to 6.27 percent in January, a significant spike from the 2.875 percent rate the shopping center’s owners negotiated in 2011, when their lender was seeking to foreclose.

Meanwhile, the center’s net operating income has remained fairly steady in recent years. The latest figures show CityPlace had a NOI of $4.8 million during the first nine months of 2015, according to Trepp, and its budget for 2016 expects an NOI of $5.8 million.

CityPlace’s occupancy rate stood at 94.6 percent as of June this year, which is an improvement from the 90.5 percent occupancy it had in January. Its loan is scheduled to mature in 2018.

“CityPlace Partners proactively engaged the special servicer in an effort to seek flexibility from our lenders and ensure the long-term success of CityPlace. We have continued to significantly re-invest in the property and are seeking to realign the retail loan with the dramatic shift in economic conditions that have impacted the property,” CityPlace Partners said in a statement. “CityPlace has revitalized West Palm Beach and not only employs thousands of local residents but generates tens of millions of dollars in tax revenue for the City and County and it is our sincere hope to continue discussions in good faith in an effort ensure the long-term success of CityPlace.”

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