A 50-year-old Delaware County mall is facing potential distress after the owners failed to pay off their loan ahead of its maturity date last month.
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The $32.4M loan underpinning the Springfield Mall, which is owned by a 50-50 joint venture between PREIT and Simon Property Group, was set to mature in early October.
It has since been flagged as “non-performing matured,” according to Morningstar Credit, which says the loan could be heading toward special servicing.
The loan is only securitized by the in-line portion of the mall, not the anchor spaces occupied by Target and Macy's.
PREIT and Simon didn't respond to Bisnow’s requests for comment.
The mall on Baltimore Pike has failed to meet the expectations outlined in the loan’s underwriting over the last several years. Net cash flow last year was 29% less than what was expected when Cantor Commercial Real Estate Lending originated the loan in 2015, according to Morningstar.
Its occupancy rate this year stands at 89%, down from 97% in 2023 but up from 83% in 2020.
Lower sales for stores at the property appear to be part of the problem, as retailers at the property pay their rent as a set percentage of their income.
“Many tenants had lower sales in the past year resulting in lower percentage rents received at the property,” according to Morningstar’s commentary.
The 611K SF mall, built in 1974 and last renovated in 1997, is less than 2 miles from another Target on the same road.
Its struggles could partly be attributed to limited dining options and a strategy of backfilling vacancies with local tenants, which tend to pay lower rents, Morningstar Senior Vice President David Putro said.
“A lot of times when that happens, it keeps the loan solvent during its term,” he told Bisnow in an emailed statement. “But refinancing a mall like that is a challenge if not impossible everywhere.”
PREIT and a Simon subsidiary spent $103.5M on the property in 2005, the Philadelphia Business Journal reported. The Target space was occupied by a Strawbridge’s department store at the time.
PREIT and Simon properties in other parts of suburban Philadelphia are still attracting new tenants.
Dick’s Sporting Goods is opening House of Sport experiential retail locations at PREIT’s Cherry Hill Mall and Simon’s King of Prussia Mall. The extra-large stores often feature attractions like ice rinks, rock climbing walls and turf fields.
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