As the death of the US regional mall continues, the CMBS loans tied to them continue to suffer, most recently with the Washington Square Mall in Indianapolis, Indiana, which has been resolved with heavy losses, according to April remittance data flagged by Trepp.
As of March, the asset was split between a $14.2 million A note, which was liquidated with a 77 percent loss, and a $12.5 million B note that was written off in full. The face amount of the two pieces had made up over 45 percent of the remaining collateral behind the MLMT 2004-BPC1 deal.
Back in 2010, the loan collateralized by the 497,809 sq ft regional mall was transferred to special servicing for imminent monetary default and, in exchange for a $2 million borrower contribution, was split into a $15 million A note and $12.8 million hope note, according to Trepp.
“The once-venerable Washington Square Mall is looking forlorn these days… Traffic is so slow that mall walkers often outnumber shoppers,” the Indiana Economic Digest noted, and that was back in November of 2011.
The mall had actually beat the odds through 2011, when occupancy was 86.6 percent and slipped to 77.2 percent in 2012, according to published reports at the time. But by December 2013 the mall was sent to special servicing again as it continued to suffer from high operating costs and declining occupancy, which at the time hovered around 44 percent. In February 2015, the property was appraised for $5.2 million and was later placed on the market for sale early this year.
Crime hasn’t helped the mall: in October of 2015 three people were shot and injured at the mall when a suspect opened fire on a man that he knew near one of its entrances.
The rise of e-commerce, demographic issues and economic problems are partially to blame for the decline of US regional malls, which were once built with location as an afterthought, as a mall building craze swept the nation.
As previously reported in Real Estate Capital‘s weekly column, 10 of the largest loans from the CMBS 1.0 era alone, spanning nine US states, experienced an average loss severity of 76 percent, or about $625 million of their original $822 million balance, according to Trepp data.
Post-recession CMBS (2.0 and beyond) malls in distress include a $50 million loan in special servicing backed by the Hudson Valley Mall in Kingston, New York, where JC Penney has vacated and Macy’s will close this year, part of CFCRE 2011-C1 (16.5 percent). And the underperforming Gateway at Salt Lake City loan, part of JPMCC 2010-C1 (29.2 percent), has led to various ratings downgrades.
Sears is one of the major retailers to have reportedly vacated the Washington Square Mall.