Mall Of America Avoids Foreclosure

Mall of America

The bad news continues to pile up for the mall sector. With real estate investment trust CBL Properties reportedly preparing to file for bankruptcy earlier this week, now the country’s largest mall is fighting to avoid foreclosure.

Bloomington, Minn.-based Mall of America, which has reportedly missed its last three mortgage payments as it deals with pandemic-driven shutdowns, has entered into a forbearance agreement with a special servicer on its loans via its owner Triple Five Group. Triple Five also owns the struggling American Dream megamall in the New Jersey Meadowlands outside of New York City.

According to Marketwatch, a special servicer handles commercial debt payments on behalf of multiple lenders. They are often in charge of negotiating debt relief in the case of an imminent foreclosure. The forbearance gives the MOA a shot at staying out of foreclosure until foot traffic increases, which could be as long as the pandemic is still spiking in several states.

A forbearance agreement “is good news as it gives Mall of America and its owners some breathing space,” Neil Saunders, managing director of the retail division of analytics company GlobalData, told the Minneapolis Star-Tribune. But Triple Five still has a property on its hands that has been significantly devalued. Commercial real estate firm Trepp reports that the collateral value of the mall has fallen to $1.9 billion from $2.3 billion in 2014.

According to Trepp, the portion of commercial retail loans that are 30 or more days delinquent was 16.1 percent as of July 2020, down from June’s 18.07 percent. That’s double the record high of 8.14 percent reached following the 2008 financial crisis.

The percentage of retail loans with special servicers was 16.04 percent as of July. The percentage of loans that were with a special servicer at the end of 2019 was 4.90 percent, per Trepp.

Mall of America reopened  with around 150 of the mall’s 500 stores open for business; to date, about 85 percent of stores have reopened. The mall has not released revenue numbers, but the Star-Tribune said the number of visitors has continued to grow while the complex complies with guidelines on capacity, with less than 50 percent of its daily average of more than 100,000 guests.

“MOA has made changes throughout its 5 million-square-foot property to try to prevent the spread of the coronavirus,” the newspaper reported. “Masks are required for everyone over age 5. Hand sanitizer stations are spaced out throughout the mall. The mall also is operating on reduced hours to allow for more cleaning time. Temperature checks, appointment requirements and capacity restrictions have shoppers waiting outside some stores. Audio messages and wall signs remind people about measures to stay safe.’

Meanwhile, CBL Properties has struck a deal with its lenders on a restructuring plan that will eliminate $900 million in debt and reduce annual interest expense by $20 million. The announcement follows yesterday’s second-quarter earnings call, where CBL revealed it had drawn down its entire revolving credit facility, experienced $215.3 million in losses over the first half of the year, and expected to enter foreclosure proceedings on four properties including the Burnsville Center in Minneapolis with $64.5 million outstanding.

“Many of the bankruptcies, not all but many that you’ve seen, were companies that COVID-19 and the destruction with it was kind of the tipping point,” said Christina Boni, a senior analyst for Moody’s Investors Service, told the Star-Tribune. “It’s like suffocating the patient. All of a sudden you have all of this inventory and you have no way to sell it to anybody.”