Stonehill Lends $160M on Five Regional Mall Properties

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Stonehill has deployed $160 million of capital for the acquisition of five regional malls across the U.S., Commercial Observer has learned.

The largest of the transactions involved a $42.3 million first-mortgage loan for Greenwood Mall, a 970,523-square-foot shopping center in Bowling Green, Ky., owned by Kohan Retail Investment Group. The firm also supplied a $42 million first-mortgage loan for Kohan’s 970,000-square-foot Livingston Mall property in Livingston, N.J.

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Atlanta-based Stonehill, which is affiliated with the Peachtree Group, also provided a $28.8 million first-mortgage loan for Kohan’s Cumberland Mall in Vineland, N.J.; a $25.5 million first-mortgage loan for the landlord’s 874,000-square-foot The Mall at Robinson in Pittsburgh; and a $24 million first-mortgage loan on 4th Dimension PropertiesBellis Fair Mall in Bellingham, Wash.

“The one thing that these transactions all have in common is [the malls are] all trading at a 30 percent discount to the last trade value,” said Daniel Siegel, president of Stonehill CRE, which launched in May. “All of these are situations where we feel that the headline risk associated with the asset class has become outpaced with the actual cash flow of the assets themselves.”

Siegel added that properties have sound occupancy levels and debt service coverage ratios with solid plans to stabilize cash flow levels, which took a hit during the beginning of the COVID-19 pandemic. He said much of the positive outlook on these malls stems from a belief that there is still value in the brick and mortar retail sector as evidenced by traditional in-store purchases still accounting for the majority of holiday spending in December, according to the National Retail Federation.

Greg Koenig, Stonehill’s senior vice president, said while traditional retail was struggling even before COVID, the pandemic has brought greater appreciation for in-store experiences for certain shopping items, a trend that bodes well for regional malls as an investment.

“What COVID showed was that people want experiences, they want to interact, they want to see the products, which really plays a part in having regional malls,” Koenig said. “It’s had several years to really discount the cash flows, and coming out of COVID we feel people just discounted  the cash flow too far considering how much appetite there is for people to still go back to stores in person.”

Stonehill has been active on a number of hospitality deals of late, including providing $79.8 million of bridge financing for Churchwick Partners to acquire and recapitalize 12 extended-stay hotel properties in July. It plans to originate roughly $500 million of capital in 2023. 

Andrew Coen can be reached at acoen@commercialobserver.com