Debt problems surface at crop of Brookfield malls

Following heavy losses on two L.A. office towers, Brookfield now faces distress on a $1 billion crop of malls, including an East Coast giant staring down foreclosure.

North Jersey’s Woodbridge Center, a super-regional mall across the river from Staten Island, is in foreclosure proceedings after Brookfield defaulted on the property’s $225 million loan.

Like many troubled malls, Woodbridge is in part a casualty of the pandemic.

Brookfield lost an anchor tenant when Sears, which occupied a quarter of the mall’s rentable area, exited in April 2020. Within a month, Brookfield had fallen behind on debt service. In June, the loan was transferred to special servicing for imminent default.

Lender Rialto Capital Advisors sued to foreclose in late 2021. Court records show little sign of when or how Brookfield will settle its debt.

As of April, a receiver is still collecting rent from mall tenants. A source familiar with the matter says the firm continues to work toward a resolution, noting that workouts take time.

But a look at Woodbridge Center’s financials shows the immense challenge facing it.

Cash flow is not covering debt service. The property carries a debt service coverage ratio of 0.42. Anything below 1 signals revenue is less than loan payments. The standard minimum for good health is 1.25.

Occupancy stands at 63 percent and could fall another 15 percentage points over the next year, as “near-term rollover risk is noteworthy,” Morningstar servicer commentary explains.

All told, the mall’s value has plummeted a staggering 77 percent to $86 million from the $366 million it was appraised for in 2014.

Woodbridge is just one piece of an iceberg. In May, servicers watchlisted the $265 million loan backed by the retail component of Lower Manhattan’s Brookfield Place.

The loan is not delinquent and the mall is 92 percent occupied. However, the debt service coverage ratio stood at just 0.66 in December and its appraised value has slipped nearly 10 percent since 2021. The loan comes due in August. Brookfield told its servicer it plans to tap one of its extension options.

The firm owns seven other malls that Trepp flagged for troubled debt. They span the Midwest, including Minnesota, Indiana and Michagan, and the East Coast, specifically Virginia, South Carolina and Alabama.

All are at least 60 days delinquent. On several properties, servicer commentary indicates that Brookfield plans to throw in the towel.

Lenders on the $174 million debt collateralized by Virginia’s Chesterfield Town Center and Michigan’s RiverTown Crossings are considering deeds-in-lieu of foreclosure.

At Glenbrook Square in Indiana, Brookfield tried to hand the property back to its lender during the pandemic but appears to have rolled back that plan. A servicer note says “there are still current and future capital needs that need addressing.”

And in Minnesota, Brookfield has not recapitalized the $82.5 million debt behind Crossroads Center after a maturity default in April. That property’s value has fallen 70 percent in the last decade.

“Borrower is unwilling to inject additional funds into loan,” servicer commentary states. “Will assist lender in consensual sale or cooperate in traditional foreclosure.”

The firm did notch a workout on a $281 million loan on three properties from its acquisition of General Growth Properties in 2018.

Brookfield modified its loan in 2022, but declined to take a one-year extension option in the process, which Trepp characterized as “surprising.”

Brookfield declined to comment.

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