Brookfield Defaults On $260M Loan Tied To South Florida Mall
Brookfield Property Partners failed to pay off a quarter-billion dollar mortgage tied to the Pembroke Lakes Mall last month, and the debt has now been transferred to special servicing.
Roughly 535K SF of the 1M SF mall in Broward County serves as the collateral for a $260M, single-asset CMBS loan originated by Goldman Sachs in 2013.
The CMBS loan tied to Brookfield’s stake in the Pembroke Pines mall was transferred to special servicing after defaulting on the mortgage following its maturity at the beginning of March, according to the Morningstar Credit database.
The New York-based company, a subsidiary of Brookfield Corp., is discussing next steps with the lender after the loan was placed with special servicer Keycorp Real Estate Capital Markets, according to Morningstar Credit.
Occupancy at Pembroke Lakes was roughly 95% as of September, but its cash flow has declined nearly 30% since the mortgage was issued, according to Morningstar. Brookfield didn't respond to Bisnow’s request for comment.
Kroll Bond Rating Agency has downgraded its rating of the CMBS loan, GSMS 2013-PEMB, twice since 2023. As of October, it estimated the property's value to be $159M, which would amount to a $101M loss to bondholders.
KBRA considered the impending March maturity date and “challenges the borrower will face in obtaining a refinancing of the loan without providing additional equity” as reasons for the downgrade, KBRA analysts wrote last year.
The non-recourse, 12-year, interest-only mortgage has a fixed annual interest rate below 3.6%. The mall also has four anchor spaces spanning a combined 456K that don't serve as collateral.
Brookfield, which owns one of the largest mall portfolios in the U.S., has managed to steady Pembroke Lakes' performance following the pandemic — occupancy dipped to 74% in 2022, The Real Deal reported — although rising expenses have taken a bite out of its income.
Brookfield acquired the property at 11401 Pines Blvd. in 2018 when it acquired shopping mall REIT General Growth Properties.
The mall, constructed in 1992 and renovated in 2006, is anchored by JCPenney, which occupies 147K SF, and Dillard’s, which occupies 157K SF. Both retailers have owned their spaces since the mall opened, according to KBRA.
Brookfield has signed Hollister, P.F. Chang’s, Camille La Vie, and Karma and Luck to leases in recent years, and Macy's recently extended its 180K SF lease at the mall until 2028.
Retail properties have recently been in fashion among commercial real estate investors because a lack of new supply has allowed landlords to raise rents. But that hasn't saved owners with loans coming due. Nearly 8% of CMBS loans tied to retail properties were delinquent last month, according to Trepp. That is up from 5.6% a year ago.
