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Former Simon Property Group Malls See Valuations Slashed Up To 88%

Malls once part of Simon Property Group’s nationwide portfolio have seen their worth fall off a cliff, with appraisers slashing a handful of valuations up to 88% in recent weeks.

Simon designated 13 of its properties as “non-core” in its latest earnings report. Anchor tenants increasingly vanished from those malls even before the coronavirus pandemic, and all but two of those assets have been transitioned to their lenders, according to DBRS Morningstar.

The closed Sears storefront in the Crystal Mall in Waterford, Connecticut.

The approximately 520K SF collateral at Crystal Mall in Waterford, Connecticut, recorded the most dramatic fall, from a valuation of $153M in 2012 to just $18.7M in February, an 88% drop, according to CMBS tracking firm Trepp.

Sears left the mall in 2018, and Macy’s is on its way out as well, according to The Day. Simon was in the process of transferring the mall to its lender as recently as January.

Appraisals for other malls that were until-recently owned by Simon have had nearly as drastic drop-offs in their valuation.

The Square One Mall in Saugus, outside of Boston, saw its valuation drop 75% collateral valuation, Trepp reported last week. The value dropped from $201M at the time of the CMBS loan's securitization in 2012 to $50.5M this month. The vacant Sears and still-open Macy's are not part of the loan's collateral.

The Dover Mall in Delaware, a 554K SF center valued at $129M in 2011 was lowered to $41M in February, a nearly 69% chop. The 385K SF non-anchor space at Mall at Tuttle Crossing in Dublin, Ohio, saw its valuation of $240M in 2011 fall to $80M under a new appraisal, Trepp analysis revealed in December. Both malls are in receivership.

The Emerald Square Mall in North Attleboro, Massachusetts, was handed to JLL by a federal judge in November, The Sun Chronicle reported. The imminent closing of Sears at Emerald Square is expected to trigger co-tenancy clauses, according to a Fitch Ratings note, which would downgrade the rating of the loan. The mall behind $97.7M in CMBS loans hasn't yet seen its valuation cut — it was appraised at $167M in 2012.

Simon saw a $1B revenue drop between 2019 and 2020 as the pandemic kicked into hyperdrive the reckoning facing Class-B malls. When talking about the malls on which Simon had nonrecourse CMBS debt, CEO David Simon said some of the deals could be restructured, but acknowledged the publicly traded firm was comfortable handing back the malls, rather than try to rescue them.

“In some cases, they’ll be restructured, mutually agreed to; and if not, and the special servicer would like to own the real estate, we’re more than happy to cooperate and do it in a professional manner,” Simon said, according to a transcript of the call. "It’s absolutely in the best interest of Simon Property Group shareholders those decisions that we’re making on that front ... [We] hope to make deals in some — if not, then they’ll no longer be part of our portfolio, and we wish that new owner the best of luck."