Value Of White Marsh Mall, Now In Receivership, Has Fallen 73%
The White Marsh Mall, a massive 1980s-era shopping center outside Baltimore, has faced a declining financial picture over the last four years as it has struggled to recover from the pandemic.
The latest sign of that distress is a new appraisal that puts the mall's valuation at $80M, down 73% from its $300M valuation when a CMBS loan backed by the mall was issued in 2013, according to Morningstar Credit.
That loan totaled $110M at issuance and still has a balance of $108.2M, according to Morningstar. The loan matured in May 2021, but it was transferred to special servicing in August 2020 due to "imminent monetary default." In January 2023, a receiver was appointed to take control of the property.
The latest update from special servicer Rialto Capital is that the lender is evaluating the collateral, and it anticipates coming to a resolution in September, according to Morningstar.
The receiver controlling the property is Spinoso Real Estate Group, which posted on its website in February 2023 that it landed the White Marsh Mall as a new property assignment and looked forward to "making a big impact at the property and in the community through leasing, property management and marketing."
Built in 1981, the 1.2M SF mall is owned by Brookfield, which obtained it as part of its 2018 acquisition of General Growth Properties. It is one of the largest malls in the Baltimore region, sitting about 12 miles north of the city, just off I-95.
The CMBS loan is backed by the 700K SF central portion of the mall. The valuation of that portion of the mall has fallen every year since the loan was transferred to special servicing, according to Morningstar, from $124M in 2021 to $113M in 2022 and $95M last year.
Anchor store Sears closed in the spring of 2020, and that 169K SF space has remained vacant since, but it is not part of the asset collateralized by the CMBS loan. The mall's other anchors that don't serve as loan collateral are JCPenney and Macy's, while the Macy's Home Store and department store Boscov's are encumbered by the mortgage.
The 700K SF in the securitized loan is 97% occupied, according to Morningstar, but it has seen declining cash flow. Its net operating income has fallen from $19.5M when the loan was issued to $13.2M in 2022 and $12.1M last year.
The combination of high occupancy and declining cash flow typically comes when malls fill vacancies with temporary or local retailers, which appears to be the case with the White Marsh Mall, Morningstar Credit Senior Vice President David Putro said in an email to Bisnow.
"The other thing here is that Brookfield really had no skin in the game," Putro added.
"This was a GGP property that Brookfield acquired when [it] bought out GGP. The equity in the deal was all on paper — the loan had paid off an existing loan and returned equity to GGP. So when COVID hit, it moved to special servicing and got reappraised below the loan balance, Brookfield no longer had even paper equity so its motivation to contribute additional equity or work towards a resolution with the servicer was probably limited."
Another massive GGP-Brookfield mall has faced financial challenges in the Boston area: the 1.7M SF Natick Mall. Brookfield still controls the mall, but it has seen declining cash flow, and its $505M CMBS loan is on Morningstar's watchlist. Putro told Bisnow in June there is "lots of risk" it could go to special servicing ahead of its November maturity.
