Brookfield and Namdar plan to hand over keys to struggling malls

CMBS loans on Brookfield’s Florence Mall in Kentucky and Namdar’s Fashion Square in Michigan are over 90 days delinquent

Jared Chupaila, CEO of Brookfield Properties’ retail group, with Florence Mall and Fashion Square (Brookfield, TripAdvisor, iStock)
Jared Chupaila, CEO of Brookfield Properties’ retail group, with Florence Mall and Fashion Square (Brookfield, TripAdvisor, iStock)

Some mall owners have given up trying to revive their struggling malls and pay off their debt payments and are now seeking to hand over the keys to their servicers.

Brookfield Properties and Namdar Realty are separately requesting they be allowed to give up their J.C. Penney-anchored malls to special servicers to avoid loan foreclosure, according to Trepp. The action is known as a “deed-in-lieu.”

Brookfield is over 90 days past due on its $90 million CMBS loan for the Florence Mall in northern Kentucky, according to Trepp. The property was sent to special servicing in July. The special servicer said it will continue workout discussions, according to Trepp.

The mall totals 384,111 square feet and is anchored by J.C. Penney and Macy’s. The collateral was valued at $158.6 million in 2012.

Namdar Realty has requested a deed-in-lieu for a $33.3 million loan backing a 450,000-square-foot mall in Saginaw Township, Michigan, according to Trepp. The mall, known as Fashion Square, was already struggling prior to the coronavirus since one of its anchors, Sears, vacated the mall in 2019. JCPenney is currently the mall’s largest tenant with 34 percent of the space.

The loan is over 90 days delinquent and Namdar said it will “cooperate with a receivership,” according to Trepp. Namdar bought the property and assumed the debt from CBL Properties in 2016 for $66 million.

In a statement, a representative for Namdar confirmed it would hand over the mall.

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“Despite the team’s persistent leasing strategies and countless efforts that have proven effective at other properties, Fashion Square Mall ultimately became unsustainable as a result of the coronavirus-induced shutdowns,” the representative said.

Brookfield did not immediately return a request for comment.

The move by Brookfield and Namdar could be a sign of things to come for mall owners.

The lingering impacts of the pandemic have caused a number of anchor tenants such as Neiman Marcus and Lord & Taylor to file for bankruptcy, leaving malls with massive vacancies and few options to fill them.

The malls most likely to see new owners are those with CMBS debt. Those loans are more difficult to restructure because of covenants bondholders have with servicers, means many of these loans could go into default.

On Tuesday, CNBC reported that Brookfield, one of the largest mall owners in the country, plans to lay off 20 percent of its retail staff. The company said it will make cuts “to align with the future scale of our portfolio,” according to Jared Chupaila, CEO of Brookfield’s retail group in an internal document shared with CNBC.

It became one of the largest mall owners in the country when Brookfield Property Partners acquired Chicago-based GGP for $9.25 billion in 2018 and merged the assets into Brookfield Properties.

In September, Brookfield Property Partners and Simon Property Group agreed to buy J.C. Penney out of bankruptcy in a deal valued at $1.75 billion. J.C. Penney is an anchor tenant at many Brookfield and Simon Property’s malls.