Simon Property Group Lands $1.2B Refi For The Galleria
Simon Property Group secured a $1.2B CMBS loan for The Galleria as the largest mall in Texas outperforms its prepandemic sales.
Proceeds from the 10-year fixed-rate loan, along with $10M of cash equity, will be used to refinance the debt on the 2M SF super-regional mall at 5085 Westheimer Road in Houston.
The $1.2B of existing debt is from the mall’s previous loan and closing costs, according to a KBRA presale report.
The previous $1.05B loan issued in February 2015 was set to mature on March 1, according to Morningstar Credit data.
The new loan, with a 6% interest rate, was expected to be originated on Jan. 30 by a group of about a dozen banks led by Bank of America, according to the KBRA report. The loan closed Jan. 27, BLDUP reported.
The loan’s sponsors are Simon and Institutional Mall Investors, a joint venture of Miller Capital Advisory and the California Public Employees' Retirement System.
About 1.6M SF of the mall serves as collateral for the loan as the Houston Galleria complex also includes three office buildings and two Westin hotels, the document states. Two of the mall’s anchors, Macy’s and Nordstrom, own their improvements and underlying land and are not part of the loan collateral.
The mall has more than 250 tenants and four anchors, including Saks Fifth Avenue and Neiman Marcus. The shopping portion of the development is 91.7% leased, excluding temporary tenants, according to KBRA. That is up from 90% occupancy in 2019, a number that dropped to 87% during the first four years of the pandemic.
Sales per square foot have surged over the past five years, from $975 in 2019 to $1,386 in the year ending in October 2024, the report states. The mall produced about $1.4B in sales over the 12 months ending in October.
The Galleria outperforms its nearby competition. Almost 28M SF of retail inventory in Houston’s Galleria/West Loop North submarket has an average occupancy rate of 75.4% according to REIS.
Simon initiated a multimillion-dollar renovation project at The Galleria in May. A significant portion of the project is focused on improving the aesthetics of the north- and east-facing valet entrances, “creating a refined and welcoming ambiance for the 30 million plus shoppers and diners who visit annually,” a press release states.
Those upgrades are expected to be complete by early this year. The Galleria first opened in 1970, and Simon and Institutional Mall Investors acquired it in 2002. The companies have spent more than $330M on expansions and renovations since 2015, according to KBRA.
“Simon is investing in The Galleria once again to ensure the center continues to raise the bar and set the industry standard for premier centers across the world,” Simon President of Development Mark Silvestri said in a statement about last year’s renovation project.
