Another Commercial Mortgage Default; Simon Properties Fails to Refi Debt on The Mall at the Source

104_mall_at_the_source

 

And so on and on it goes.

 

The Mall at the Source in Westbury, NY has defaulted on its mortgage. In 1999 they borrowed about $120mm. The loan was interest only, due and payable in 10 years. The 10 years is up but the property value and the income the mall produces is down.

 

 

 

They used to have some great stores in that mall; Circuit City (bankrupt), Steve & Berry’s (out of business), Fortunuff (belly-up). But now-a-days they feature a military surplus store, a dollar store, a 99 cent store (that does considerably more business than the dollar store) and their big anchor tenant is a store that sells gold by the foot and martial arts equipment. Just kidding. Saks and Jones NY are still hanging in there along with some other decent names…for now.

 

But the drop in income has caused a drop in the value of the real estate and there is not enough equity or positive cash flow there to justify a loan.

 

LNR Properties, the loan servicing firm, has the loan marked “non-performing, mature balloon” which is mortgage company code for “no chance of ever being repaid”

 

The giant retail REIT, Simon Properties, is the unfortunate owner of The Mall at the Source. Lucky for them there is a Bath & Body Works in the mall, ‘cause their going to take a bath on this one.

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Apply for a commercial Mortgage Loan; Online at MasterPlan Capital LLC

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2 Responses to “Another Commercial Mortgage Default; Simon Properties Fails to Refi Debt on The Mall at the Source”

  1. recessionnews Says:

    I used to live in Westbury. This is only the tip of the iceberg just starting to show – commercial real estate mortgage defaults are going to be the next wave of mortgage meltdowns. I’m certainly no expert on the subject, but I think the smartest – in this case, pragmatic thing for the lender to do, is to stall off the balloon payment for another 5-10 years, and keep collecting the interest(which, from what I understand, the mall owners were able to pay?) Things could be looking up in 5 years, and at least collecting the interest on the outstanding loan, keeping the mall’s
    tenants in business and their employees employed, seems to me to be
    a much better way to go, under the circumstances, than foreclosure, which in this case serves NO one’s purpose, least of all the lender’s.
    Property taxes are VERY high in the area, and the last thing I would want(as the lender), is to wind up being the reluctant owner of a zombie mall at decidedly UN-zombie holding costs. Foreclosing on, and then trying to sell this mall in the present market, is a CERTAIN loss for the lender, so my gut feeling is something will be worked out to avoid this.

  2. mike Says:

    > ‘cause their going to take a bath on this one

    the loan was securitized into a fairly clean 1999 deal, so if LNR still holds the first-loss bond, they already made their money back and much more.

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