Mall of America gets modified terms on $1.4 billion mortgage

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The Mall of America is current on mortgage payments it had missed during the pandemic, after lenders agreed to ease terms of its $1.4 billion loan.

The largest U.S. shopping center became delinquent on its debt last year after its owner Triple Five Group began skipping mortgage payments, citing hardships from the COVID-19 pandemic shortly after the loan's initial interest-only period on a 4.38% fixed rate expired in April.

It received a modification from lenders in December that allows it to continue to pay only interest on the debt.

Under the terms of the modification, the 5.6 million-square-foot mall will continue to meet increased reporting requirements and send net cash to its lenders on a monthly basis, according to its special servicer. The shopping center has already done so for April to November 2020 as part of a forbearance and cash management agreement. The loan matures in 2025.

The loan was issued in 2014, and securitized in a large-loan transaction (CSMS 2014-USA). The interest-only terms mean the loan still had $1.39 billion in unpaid principal as of last August, according to Moody's Investors Service. Moody's also reported the outstanding advances of $28.1 million and an interest shortfall totaling $803,823.

Both Moody's and S&P Global Ratings have issued downgrades to subordinate note tranches of the deal since the onset of the COVID-19 outbreak, but the mall also had declining net operating income in recent years.

CWCapital, the mall’s special servicer, will monitor rent collection efforts and expenses as part of the deal. The Mall of America has been working to collect past due and current rents from its tenants, many of which have struggled financially since the pandemic began.

Details of the modification were earlier reported by the Minneapolis Star Tribune.

COVID closures

The Mall of America was forced to temporarily close last March because of the COVID-19 pandemic. It reopened in June with limited hours and select attractions. As of November, the mall’s food services were available for takeout and delivery only and its Nickelodeon Universe amusement park was closed.

Retailers and their landlords, hurt by competition from online stores even before COVID-spurred shutdowns, have struggled to make rent and mortgage payments. The Mall of America collected about 33% of rents from retail tenants in April and May and 50% in July, according to its special servicer.

Other mall owners reported rock-bottom April rent collections, including about 12% for Tanger Factory Outlet Centers Inc., roughly 20% for Brookfield Property Partners and 26% for Macerich Co.

The Bloomington, Minn.-based mall is owned by members of the Ghermezian family, whose holdings also include the West Edmonton Mall, a 5.3-million-square-foot complex in their Canadian hometown, and American Dream, a 3-million-square-foot mall in East Rutherford, N.J.

Glen Fest contributed to this story.

Bloomberg News
CMBS Delinquencies MBS Retail industry