Simon-Owned Miami Mall Loses Half Its Value As Lender Negotiations Continue
Simon Property Group’s Miami International Mall was hit with more bad news after its appraisal value was recently slashed in half.
Miami International Mall was appraised at $159M in July, down 59% from its $391M valuation in 2013, according to Morningstar Credit data. It is another setback for the Doral mall which was moved into special servicing in February after Simon failed to pay off a CMBS loan on the property after it matured.
The mall spans more than 1M SF when including the big-box anchor tenants, but the CMBS debt covers only the 303K SF central portion of the property owned by Simon.
After missing a balloon payment in February, Simon put up $2M in equity to secure a one-year forbearance on the debt, according to Morningstar commentary. It could pay down an additional $3M before February 2025 to secure another forbearance.
“I would expect they'll get to the 2025 maturity and then extend it a second time,” Morningstar Credit Senior Vice President and Head of CRE Analytics David Putro said. “For Simon to come out of pocket just $3M to extend for another year seems like a no-brainer.”
Simon didn't respond to Bisnow's request for comment.
The $160M loan on the property was first issued by Barclays in January 2014 and then split into two pieces that were securitized in separate CMBS trusts.
If Simon was planning to hand the property back to the lender, it probably wouldn’t have provided an equity infusion to secure an extension, Putro said.
While the aging mall is facing competition from the more modern Dolphin Mall less than a mile away and the nearby Dadeland Mall, it still showed a strong performance in the first quarter.
Miami International Mall had a debt service coverage ratio of 2.85 in March and 24% higher occupancy than at the end of 2023, according to Morningstar's database. In the first three months of the year, the mall saw $6.9M in revenue and $1.6M in expenses.
Part of the forbearance agreement included the creation of a special fund, called the omnibus reserve, that will split any excess revenue in half between Simon and the debt service.
If the mall maintains its current performance, the $158M balance on the CMBS debt would likely decline faster than if Simon were making interest-only payments, Putro said.
Miami International Mall includes five big-box stores owned by investment vehicles for Sears, Macy’s, JCPenney and Ohio-based Alstores Realty Corp.
If Simon could gain control of the entire property, it could also be a viable redevelopment site in fast-growing Doral. The mall operator jumped into the multifamily business in May 2023 when it rolled out a $1.5B plan to build up to 2,000 residential units at its properties.
It has also been partnering with developers to add multifamily elements to its projects, including a May announcement that it planned to partner with Amli Residential on 850 luxury apartments at Fashion Valley in San Diego.
“We've seen Simon, in other markets, hold on to a mall that's underwater because they want the land for apartments,” Putro said.
Indianapolis-based Simon, America’s largest mall owner, reported strong second-quarter earnings and its stock is up more than 11% year-to-date. Its net income from March through May totaled $493.5M, or $1.51 per share, up from $486.3M during the same period in 2023.
Retail sales have come in above projections for Simon, providing the REIT with a bit of a financial cushion, Simon Property Group CEO David Simon said on the firm’s earnings call earlier this month.
Simon refinanced 10 properties in the first half of the year, and its CEO expressed a note of optimism about future maturities on the call.
“We're not living mortgage to mortgage,” Simon said. “We're a different kind of company.”
