Anchor Problems Send Pair Of Massachusetts Mall Loans To Special Servicing
A $64.5M CMBS loan on the 398K SF Walpole Mall about 20 miles south of Boston was transferred to special servicing in May, while a $66M loan on a 530K SF portion of Dartmouth Mall, which is southeast of Providence in the southern part of Massachusetts, was transferred to special servicing in June.
Other than perhaps hotels, the coronavirus pandemic has had the greatest impact on the retail sector, with as many as 25,000 stores predicted to close in 2020. Servicer commentary on the Dartmouth Mall loan noted the sponsor, Pennsylvania Real Estate Income Trust, which owns the mall through a subsidiary, requested relief in the wake of the coronavirus pandemic, according to a report from DBRS Morningstar.
Sears dealt a blow to Dartmouth Mall, exiting in 2019 the more than 20% of the mall’s net rentable area it occupied. Burlington Coat Factory was set to fill a chunk of the space vacated by Sears in the spring — a little more than 8% of the NRA. The mall closed at the onset of the pandemic and reopened on June 12 with limited hours.
Other anchors of the shopping center have shown signs of decline: It contains a JCPenney, which filed for bankruptcy in May; Macy’s, which sought $5B in debt financing at the beginning of the pandemic; and AMC Theatres, whose survival is tenuous.
The future of Dartmouth Mall’s parent company isn’t assured either. The Philadelphia-based PREIT said in its first-quarter earnings report in May that financial challenges have created "substantial doubt about the company's ability to continue.”
Walpole Mall was in a better position before the pandemic. It reached 100% occupancy in spring 2017 and stood at 96% occupancy in December 2019.
That figure fell to 89% in March after its third-largest tenant, Office Max, opted not to renew its lease, CMBS tracker DBRS Morningstar noted in its latest report on the loan. Los Angeles investor RP Realty Partners owns the property and is the sponsor on the CMBS loan, which was split into two different notes. There is also a $10M mezzanine loan on the property.
The mall’s potential for a further drop in occupancy is cause for concern, DBRS wrote. As of September, leases comprising more than 113K SF, or nearly 28% of Walpole Mall’s NRA, were set to expire between January 2020 and when the loan matures in September 2023. Its biggest tenants are Kohl’s and LA Fitness, both of which have operations that have been severely hampered by coronavirus restrictions.
Jay Rickey contributed reporting for this article.