Finance  ·  Distress

Macerich Hands Over Santa Monica Mall to Lender After Default

The REIT bought the retail center in its hometown about 25 years ago, but failed to meet payment deadlines since the pandemic.

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The loan ranger strikes again in Southern California.

Shopping mall giant Macerich has surrendered the Santa Monica Place mall after defaulting on a $300 million mortgage tied to the sprawling outdoor retail center just down the road from the Santa Monica Pier in Los Angeles. Santa Monica Daily Press first reported the news. 

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Macerich announced its delinquency on its first-quarter earnings call. The real estate investment trust, which is also based in Santa Monica, said at the time that it was in talks with lender Wells Fargo (WFC) regarding the terms of the loan, but that a sale of the property was also a possibility. 

The single-asset borrower CMBS loan tied to the mall was originally set to mature in 2019, but received a 36-month extension at the time, pushing maturity to the end of 2022. The loan was sent to special servicing in August of that year, and received another maturity extension to December 2023. It received the special servicing treatment yet again after blowing past that deadline. 

A representative for Macerich did not immediately respond to a request for comment. 

The 527,000-square-foot mall at 395 Santa Monica Place was built in 1980. Macerich acquired it in 1999 for $130 million. The REIT renovated the property in 2007 for $265 million, transforming it into the open-air concept it is today. 

Yet Macerich has struggled to maintain the building in the wake of the COVID-19 pandemic. Two of its anchor tenants — Bloomingdales and ArcLight Cinemas — vacated the mall in 2021, and at one point last year, more than half of the mall was vacant or available for lease, according to The Real Deal, citing Macerich.

The property was originally valued at $622 million for securitization in 2017, though the most recent Broker Opinion of Value of the property valued it at $264.5 million, according to data sourced from Trepp earlier this year. 

The REIT’s default on Santa Monica Place is just another symptom of its post-COVID recovery woes. 

Despite its status as one of the largest owners and operators of shopping centers in the U.S., Macerich’s first-quarter earnings made it clear that it was hemorrhaging money and facing larger and larger debt obligations. 

The firm noted almost $127 million in net losses during the first quarter of this year, more than double its losses year-over-year, according to the report. Much of those losses are likely due to the bankruptcy of one of its major tenants in Express, which plans to close 100 of its locations nationwide. 

Nick Trombola can be reached at ntrombola@commercialobserver.com