Brookfield Walking Away From Indiana Mall, CMBS Noteholder to Assume Control

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Goldman Sachs could possibly assume control of Brookfield Properties’ 1.25 million-square-foot Glenbrook Square mall in Fort Wayne, Ind., as the property’s pandemic-stricken saga unwinds itself, according to special servicer commentary from research firm Trepp.

The super-regional mall serves as collateral behind a $162 million commercial mortgage-backed securities (CMBS) loan that was originated by Goldman in 2015 to recapitalize the property, which was then owned and operated by the now-defunct mall owner GGP. Brookfield Property Partners acquired GGP in 2018.

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The current balance of the CMBX 9 mall loan sits at $152.8 million, and it’s split between two parri passu notes. The first is a $96.2 million loan secured via the CGCMT 2016-GC36 transaction, and the second carries a roughly $56.6 million remaining balance within the GSMS 2015-GS1 securitization. At the time of origination, the loans totaled $102 million and $60 million, respectively. 

Both loans were transferred to special servicing in mid-July 2020 — a month after Brookfield first requested relief — as the mall took some lumps in the first few months following the onset of COVID-19, as per servicer commentary. The loan eclipsed the 90-day delinquent mark a few weeks later in August, and Greystone and Brookfield began working toward a resolution.

While the various workout strategies that could’ve been pursued or contemplated aren’t immediate clear, most recent servicer commentary from Trepp posted earlier this month shows that Brookfield is ready to walk away from the property and that it is working with the loan’s special servicer, Greystone, to “transition the property back to the noteholder.”

Special servicer commentary from December said that Brookfield “is unwilling to come out of pocket to support the property at the current loan basis as they do not expect the current depressed value of the asset to exceed the loan amount in the next several years.” 

Brookfield declined to comment on the proceedings.

Greystone reported that the mall’s cash flow had been adversely impacted by COVID-19 and that Brookfield had missed its May, June and July debt payments as a result. By the time COVID-19 gripped the sector, the property’s gross income had already fallen 14 percent below what was originally underwritten and expenses had climbed 9 percent as well, according to servicer commentary from March 2020.

Built in 1966 and last renovated in the late 1990s, the two-story enclosed mall — located at 4201 Coldwater Road in Fort Wayne — was about 96.4 percent occupied at the time the loan was extended in 2015, and it registered a similar occupancy figure two years later. The mall’s occupancy fell to as low as 82 percent in the first half of 2020.

The property’s financials began to soften in 2019, and by the end of 2020, the value of the property had plummeted more than 63 percent to $102 million, per information from Trepp. The mall was valued at $279 million in 2015, which pegged the deal’s loan-to-value at 58 percent.

The mall is currently anchored by a Macy’s and a JCPenney, which together occupy approximately 434,000 square feet, and it also hosts a Barnes & Noble and an H&M, per tenant information from Trepp. A Carson’s department store also used to also anchor the mall, representing about a tenth of rentable space, before it shuttered as part of Bon-Ton’s liquidation in 2018, according to Trepp, which attributed the start of the dip in occupancy and financial performance to the initial loss of the store. 

The site used to house a Sears, which in 2018 represented about 20 percent of the mall’s net rentable area, but the department store’s bankruptcy forced it to shutter its location at Glenbrook Square that November. Publicly traded real estate investment trust (REIT) Seritage Growth Properties bought the parcel from Sears a few months later, and then moved to tear down the site’s existing Sears structure in favor of constructing a new, multi-tenant building. Before the pandemic, there were plans for a Dave & Buster’s and a HomeGoods, but the work has not proceeded as planned.