Simon Property Group’s Connecticut Mall Appraisal Section
The valuation of around two-thirds of Simon Property Group’s Crystal Mall in Waterford, Connecticut has been reduced by 87% to just $18.7 million, a sign of the seriousness of the situation for many malls in suburb.
According to Trepp, approximately 518,000 square feet of the property was backed by a $95 million commercial mortgage-backed securities loan. With the new valuation, the loan-to-value ratio reaches 508%, which means that the mall’s debt is worth about five times more than the majority of the mall.
This part of the property was valued at $153 million in 2012.
The reduction in valuation is hardly a surprise: a report from ratings agency Kroll Bond in November said Simon planned to hand over the keys to the Crystal Mall, along with three other malls, to its lenders.
Trepp notes that the loan is currently in foreclosure and that Simon is working with the lender to return the property.
Shopping center owners are increasingly giving away their keys to their lendersespecially in so-called Class B malls, which typically generate lower sales per square foot than Class A malls.
In most cases, these malls are backed by non-recourse CMBS loans. But because the loans are non-recourse, the lender can only go after the mall, as opposed to other assets owned by the borrower, making key return an attractive option.
Starwood Capital, Brookfield Property Partners and Namdar Real Estate have all sought to return struggling malls to their lenders. And Simon recently lost control from downtown Cobb Mall in suburban Atlanta after the property was seized by Deutsche Bank, according to the Marietta Daily Journal.
Even before the coronavirus, the crystal mall struggled to attract traders and visitors.
Occupancy fell to 78% in 2019 from 89% in 2012. Meanwhile, net operating income fell to $4.2 million from $11.5 million during the same period, Trepp noted.
In 2018, Sears filed for bankruptcy and vacated its 149,240 square foot flagship store at the mall. According to Bloomberg, there were 35 vacant storefronts in August 2020, nearly a third of the mall’s total stores almost seven years ago.