Mall giant Simon Property Group may soon relinquish ownership of a property in Saugus, Massachusetts, even as the broader mall sector shows signs of strength.

The $76M CMBS loan tied to Square One Mall has been transferred to special servicing ahead of its January maturity, according to Morningstar Credit. The loan tracking service wrote in a Monday report that the loan "faces nearly impossible odds to refinance."

The loan is backed by a 540K SF portion of the 930K SF mall, excluding the Sears and Macy's department stores. Simon received a five-year extension on the loan in 2022 after it dealt with pandemic-era pain, but Morningstar Credit says its net cash flow has declined every year since.

The portion of the mall tied to the loan was 74% occupied as of March 31, according to servicer commentary in Morningstar's database, which defined it as a Class-C mall.

Since as far back as 2021, Simon has listed Square One Mall in the Other Properties category in its earnings materials, a list that included many malls it gave back to lenders during the pandemic-era retail downturn.

While the REIT has recently extended other loans, Morningstar said Square One Mall's inclusion on this list last quarter indicates the property will likely be handed back to the lender and then sold.

The mall sits along Route 1 about 10 miles north of downtown Boston. In addition to Sears and Macy's, its tenants include Dick's Sporting Goods, Best Buy, TJ Maxx and Old Navy.

Simon has previously handed back or sold other malls in the Boston area. In 2021, it relinquished Solomon Pond Mall to its lender, and in 2022, it sold Emerald Square Mall.

Simon has other better-performing malls in the Boston area that it has continued to invest in. In February, it announced that it would redevelop the former Neiman Marcus store at Copley Place, bringing in an Italian marketplace and a Greek seafood restaurant. That same month, it received a $175M refinancing deal for Northshore Mall in Peabody. It has also continued to refresh Burlington Mall, completing a redevelopment of the property in 2024.

While many low-performing malls have shuttered in recent years, the sector has recovered from its pandemic-era downturn as consumers keep spending at high levels and mall owners bring in new experiential concepts that can't be replicated online.

Mall values rose 13% over the last year, the highest of any commercial real estate sector, The Wall Street Journal reported Monday, citing Green Street data. Simon Property Group's stock has risen 20.3% over the last year, beating the S&P 500 by more than 5 percentage points.