Simon Fails To Pay Off Debt On Maturing Miami Mall Loan

A loan tied to a 1M SF Miami mall owned by Simon Property Group is headed to special servicing after the debt matured this month and the retail giant didn't pay off the $160M balance on its loan. 

The debt tied to a portion of Miami International Mall in Doral was transferred to a special servicer this month after the 10-year CMBS loan passed its maturity date, according to Morningstar Credit. The total property including anchor spaces spans more than 1M SF, but the debt covers the 303K SF central mall portion owned by Simon Property Group, a real estate investment trust that owns more than 250 retail centers around the globe. 

The $160M loan was issued by Barclays in January 2014 and then split into two pieces that were securitized in separate CMBS trusts. The debt was placed on a servicer watchlist as its maturity date, Feb. 6, approached, according to commentary from servicer Midland Loan Services that was posted to the Morningstar Credit database.

The failure to pay off the balance could be tied to slumping occupancy at the property, located at 1455 NW 107th Ave., per Morningstar. The retail space tied to the loan was 78% occupied last year, and leases for 29 tenants who occupy 22% of the property are scheduled to expire within the next 12 months.

A Simon spokesperson didn't respond to Bisnow's request for comment.

The servicer has classified the loan as "performing matured balloon," indicating that Simon made its February interest payment but failed to make the maturity balloon payment, David Putro, senior vice president and sector lead at Morningstar Credit, wrote in an email. He said the loan has performed fairly well but cash flow was down around 13.5% from when the debt was underwritten in 2014. 

“Since CMBS loans are typically refinanced (rather than paid off out of pocket) and the current lending environment is not conducive to refinancing a 78% occupied property, it looks like this moved to special [servicing] to get some sort of extension,” Putro wrote.  

The strategy has become increasingly common in today’s financing environment, Putro said, with borrowers conceding structural changes to loan terms in exchange for an extension. 

Elev8, an amusement provider of activities like laser tag and bowling, is expected to take up occupancy in a vacant, 110K SF space at the mall that isn’t covered by the $160M debt but could provide a boost to the collateralized space, he said. 

“The new tenant is expected to open in early 2025, so an extension would give Simon time for a bit of stabilization, perhaps rates come down (the existing loan is at 4.42%) and the CMBS deal doesn’t go through the expenses of foreclosure or receivership,” Putro said. 

Miami International Mall includes five big-box stores not owned by Simon. Seritage, the REIT spun off from Sears when the retailer folded, owns a 190K SF space on the north side of the property. The 151K SF J.C. Penny box is owned by the Copper Property CTL Pass Through Trust that was formed after the retailer filed for Chapter 11 bankruptcy. 

Macy’s owns its 208K SF on the west side of the mall, and the two remaining boxes are owned by Ohio-based Alstores Realty Corp. and 1275 NW 107th Ave. LLC, a Miami-based entity managed by law firm KEW Legal. 

The two CMBS trusts that included the debt tied to Miami International Mall, JPMBB 2014-C18 and JPMBB 2014-C21, were downgraded by Fitch Ratings last March. 

Fitch noted that the mall faced competition from the nearby Dolphin Mall a mile west and the Dadeland Mall, another Simon-owned property 8 miles south. 

Miami International Mall, which opened in 1982, is the latest aging South Florida enclosed mall to face financing challenges. 

The Galleria Mall in Fort Lauderdale was put up for sale in November by Keystone-Florida Holding Corp. with occupancy hovering around 67%, the South Florida Business Journal reported. CBRE is marketing the 800K SF mall on 32 acres at 2442 E. Sunrise Blvd. as a potential redevelopment site. 

The Broward Mall, built in Plantation in 1979, was taken over by a Barclays-backed CMBS trust when it sold for $43M at a foreclosure auction in August 2022. Avison Young put the 470K SF mall back on the market as a potential 30-acre redevelopment play. The listing had a December 2023 deadline for offers, but a sale of the property has yet to close. 

Office distress has garnered more headlines in the past year than issues for retail properties. Retail vacancy nationally has fallen to record lows and rents have risen, but CMBS loan delinquency in the two asset classes was essentially equal in January at roughly 6.3%, according to Trepp.

But their trajectories are vastly different. A year earlier, the retail delinquency rate was 6.6%, while the office delinquency rate was 1.9%.