(Bloomberg)—Mall of America, the biggest in the U.S., had its value cut by 16% in a new appraisal as the pandemic added to the struggles it already was facing from changing shopping habits.
The 5.6 million-square-foot mall outside Minneapolis was reappraised at $1.94 billion, reduced from $2.31 billion, according to a monthly report on the property’s debt filed by trustee Wells Fargo & Co.
Malls suffered from the bankruptcies of apparel and department stores as consumers turned more to online shopping, a trend that’s accelerated since the coronavirus forced many businesses to shut their doors in March.
Reappraisals are required under the terms of many contracts for commercial mortgage-backed securities when loans are delinquent. Hotel and retail properties have had the highest delinquency rates, leading to transfers to workout specialists, known as special servicers. About 24% of hotel and 14% of retail CMBS debt was managed by special servicers in July, according to industry tracker Trepp.
The Mall of America appraisal came after the owners, the Ghermezian family, missed three monthly payments on its $1.4 billion in bond debt.
The list of recent reappraisals is still small but growing. Examples include:
Tharaldson Hotel Portfolios, owned by Colony Capital Inc., was slashed 36% in a June appraisal to $836.7 million from $1.3 billion in 2018 when the debt originated.
The South Towne Center, a mall near Salt Lake City, was appraised at $141 million in March, down from $208 million in 2014.
A portfolio of malls owned by Starwood Capital Group took a 67% value cut in an appraisal conducted in December, even before the pandemic further battered property values.
While the Mall of America gradually has reopened for business, it’s still struggling to collect rent from stores and restaurants, while its entertainment facilities are operating at low capacity.
“Retail tenant collections climbed to 50% in July from a low of 33% in April and May,” according to a report filed by the loan’s servicer. The mall’s amusement park re-opened on August 10, with guest capacity limited to 250 people.
To contact the reporter on this story: John Gittelsohn in Los Angeles at [email protected].
To contact the editors responsible for this story: Rob Urban at [email protected]
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