Becoming a prolific jingle-mailer to dump malls. Holders of CMBS eat the losses.
By Wolf Richter for WOLF STREET.
Deutsche Bank this week foreclosed on a $177.5 million mall mortgage. The mortgage had been securitized and spread over two commercial mortgage-backed securities (CMBS) in 2012. The collateral is 560,000 square feet of retail space at the 1.2 million square-foot Town Center at Cobb, in Kennesaw, Cobb County, Georgia. The regional mall has over 170 stores, including a Macy’s, a JCPenney, and a Belk (just filed for bankruptcy).
The mall was owned by Simon Property Group, the largest mall landlord and mall REIT [SPG] in America, which, in one of its acts of jingle mail, had returned the mall to the lenders.
“Jingle mail” was engraved into the American lexicon during the housing bust, when homeowners voluntarily turned their homes over to lenders, presumably by mailing them the house keys. Most home mortgages are recourse loans, and banks can drag the homeowner to court over any deficiency after the foreclosure sale – except in the 12 “non-recourse” states. But commercial real estate mortgages are non-recourse; all the lender gets is the collateral, and the owner walks away.
At the time of securitization in 2012, the collateral for the loan was valued at $322 million, according to Trepp, a data firm that tracks CMBS. And everything was hunky-dory. In October 2020, the value was slashed by 60% to $130.4 million.
The legal notice by Deutsche Bank of the foreclosure sale, reported by the Marietta Daily Journal on January 27, specified that the mall would be sold on February 2 “at public outcry to the highest bidder for cash before the Courthouse door of Cobb County.” The opening bid would be $130.4 million.
And this is what happened on February 2, according to the Marietta Daily Journal:
[Attorney Matthew Norton of the law firm Polsinelli] “read the legal notice in full on the southern steps of the county’s justice center, a recitation that took over half an hour to complete. The bargain hunters who attended the morning’s residential foreclosure auctions left hours before, leaving Norton to conduct the “public outcry” on the courthouse steps across the street from an empty Flournoy Park.
And there were no bids. So Deutsche Bank and other CMBS holders are now the proud owners of the mall. Simon Property Group has washed its hands off it, letting the CMBS holders eat the losses. And the new owners, Deutsche Bank and holders of CMBS, will now get to manage the mall.
The foreclosed mortgage is spread over two CMBS deals: a $115.4 million portion makes up 12.8% of WFRBS 2012-C7 and a $62.1 million portion makes up 6.8% of WFRBS 2012-C8, according to Trepp.
The brick-and-mortar meltdown, brought on by the switch to ecommerce which hit department stores particularly hard and has been wiping them out one after the other, predated the Pandemic by years. Sales at department stores, which form the critical anchors of malls, peaked in 2000 and have since plunged by 57%, despite 20 years of inflation and population growth.
Even before the Pandemic, Simon attempted to lease out portions of the Town Center at Cobb mall as office space to bring in some cash, according to a source cited by the Marietta Daily Journal.
And even before the Pandemic, Simon has shed malls via jingle mail, letting lenders take the losses, including the 1-million square foot Independence Center in a suburb of Kansas City, MO, in 2019. When the mall was sold in a foreclosure sale, the $200-million CMBS backed by the mall generated a loss of $149.7 million – a loss of 75%! – “the largest loss ever incurred by a retail CMBS loan,” according to Trepp at the time.
Simon Property Group also wants to turn its 426,761-square-foot Springfield Plaza in Springfield, MA, over to lenders and walk away from the $28.3 million mortgage, according to special servicer notes reported by Trepp last August. When the mortgage was securitized in 2013, the property was valued at $39 million.
In addition, according to Kroll Bond Rating Agency, cited by MarketWatch in November, Simon was planning to send jingle mail of four other malls to lenders and walk away from $411 million in mortgage debt backed by those malls: the Mall at Tuttle Crossing in Dublin, Ohio; Southridge Mall in Greendale, Wisconsin; Montgomery Mall in North Wales, Pennsylvania, and Crystal Mall in Waterford, Connecticut.
On its website, Simon has a more or less flashy webpage for each of its malls. But the doomed jingle-mail malls eventually get their webpages on Simon’s website taken down, and the old links, such as this one for the Mall at Tuttle Crossing (https://www.simon.com/mall/the-mall-at-tuttle-crossing/about), are redirected to a generic “oops” page — a form of accidental SPG jingle-mail humor.
Simon together with the second largest mall landlord Brookfield Property Partners have acquired J.C. Penney’s stores out of bankruptcy, along with other stores. J.C. Penney stores are anchor stores. When an anchor store closes, in this environment when no other department store will jump in behind it to fill the space, the mall spirals down quickly, as foot traffic to the other stores dies down further, and those stores close too.
By controlling the J.C. Penney anchor stores, and other key stores, Simon slows down the decline of its malls and gains some time – which makes sense. And if the math doesn’t work out, jingle mail is sent to the lenders.
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I was thinking of buying a Reit but now not sure.
On a separate note Deutche bank only made about
150 mil last year.This could end badly for the bank.
Deutsche Bank has been failing for more than a decade. Don’t expect it to be saved. just slowly die
Actually DB is doing well according to the headlines
Deutsche Bank swings to annual profit, beating expectations
PUBLISHED THU, FEB 4 2021
Agree probably time to buy. Routine for corporations to slash dead wood. DB also came clean on the list of money laundering clients, and in cases like the ex-pres is cutting this debt loose. All this suggests the sort of turn around Wall St likes. Negative interest rates were never good for banks and that cycle is probably complete. Have to study the problem a bit more in regard to all events in the EU, pegging Italy’s rates, new PM there, Brexit. Lots of moving parts. On the other side US banks have been nationalized to a degree that makes them less attractive.
I doubt if any bank EVER “comes clean on ALL money laundering clients”.
Would produce worldwide scandal similar to if (forget name) had not hung himself in cell, and ended any client list exposure.
Bank’s High Net Wealth Investment Depts are and will stay black boxes, just like dead people are.
And I imagine most all major media outfits are not too keenly “interested” in pursuing and then spreading that kind of information, anyway, even though it would draw lots of eyeballs.
How Deutsche let dirty clients run ramped ..
?\? a bad hair day.
Them thieves will be saved in a heart beat
Let’s not fool ourselves
in 2007 one of our ‘malls’ was sold for $235mil
in 2019 wells fargo(who had $150 mil mortgage) discounted it for $45 mil to ORIGINAL OWNERS WHO SOLD IT
Deutsche Bank is more than likely never going to go bust and will always be saved by the ECB or nationalised by the German Government.
“Too big to fail”.
The 9 banks too big to fail.
The 7 banks too big to fail.
The 5 banks too big to fail.
Was that the bedtime story that turned into a nightmare.
“securitization in 2012, the collateral for the loan was valued at $322 million, according to“…. and the owner sees a clean walk away.
I am a hardened man that will not throw up in my throat over repeatedly.
The part that is really hard to understand is how lenders allow corporate borrowers to have “non-recourse” loans that don’t provide for additional collateral/corporate guarantees of the loan.
The more I come to learn of the CMBS mkt, the more it looks like the publicly traded dumping ground for the weakest loans that no bank is willing to make/hold.
Basically, public owners of these CMBS loans really have no one looking out for their interests when the terms of these stupid loans are drawn up initially.
The investment bank “arrangers” are really in the pocket of large, “Scott free” borrowers, with whom the invt bks do repeated business.
Lender/buyers are simply suppliers of commoditized “starved money” to be lied to and abused.
And, of course, this all plays out against the background of ZIRP induced yield starvation.
Public lenders are coerced into making idiotically dangerous loans because safe, sensible ones yield 2%.
While gvt worker pension funds need 8% so their already disastrously underfunded schemes don’t accelerate their implosion.
Of course, pension fund implosions are made *worse* by the inevitable loan defaults.
Of course, the pension fund administrata could, you know, do their *job* of due diligence…but that takes more effort than being bent over by an invt banker at a “nice lunch”.
I used to work in CMBS origination years ago, and that’s exactly it. The really good loans, either those with low LTVs or sponsors (the “borrowers” are always SPVs) who are, for whatever reasons, unlikely to let it go down and will contribute additional equity if necessary, are held by insurance companies, pension funds, and others on their own books.
The loans that actually have risk are securitized, and the rating agencies are happy to give AAA ratings to the top tranches, but of course, they’re not taking any responsibility for anything, and the offering documents make that very clear!
Wall Street is corrupt to the core.
Thanks for the confirmation.
I used to do legal and financial review for syndicated bank loans and had occasion to dabble in CMBS docs.
You spend enough time looking through these 2000+ page, multi volume tomes (for each loan) and you walk away kinda suspecting that “borrowers” could renounce their debts, at will, with no consequences…the language being so convoluted, opaque,…and drafted by borrower paid/conflicted counsel.
Possibly only a tiny residue of fear of mkt consequences, restrains a wave of predatory, ruthless default among such whip-hand borrowers.
It really is an inversion of how people think the lender-borrower relationship runs.
So, if AT&T owes $150 billion plus, it turns out that is more of a problem for creditors rather the the debtor.
With so much ZIRP money flying around, there is always another lender in line, waiting to be abused.
Thanks Cas, yep. Are you an attorney as well?
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
Thank you RightNYer & Cas127. It’s nice to read the insight from insiders.
And thank you Wolf for the description of, and link to the photo of Matthew Norton in the local newspaper. A priceless Hollywood-esque vision.
You hit the nail on the head that this is a product of fake low interest rate environment brought on by Fed policy, they are forcing people to grasp for yield.
But at the same time, I feel no sorrow for CBMS buyers who ended up with this whole grasping for yield. I don’t buy this stuff because I know it’s crap. Caveat emptor. If you are buying mall CBMS you are going to have some losses.
I saw 2 big Limos loaded with (I assume) Simon brass pull up behind our downtown covered mall, which they own. Gave them my best extended dirty look. Also started charging for parking garage. Simon also owns our oldest covered mall NW of there, but last I was there it was really dying. Supposedly a lot spent on upgrades, but I haven’t been there to see.
But S of town is a big miss mash obviously unorganized, huge strip mall AREA, guess one could say it’s “anchored” by a Costco, that seems anecdotally to get far more traffic than either of the covered malls. Don’t know who owns it, or if it’s just a lot of people.
Covered malls have big extra costs, I’d guess, and not much need for them in this part of CA.
They need to make home mortgages non recourse too.
Joan, in a bunch of states, including California and Texas, they are. That’s why so many people walked away from their mortgages back during the last downturn when they were underwater. California used to have a peculiar rule that refinancing made a non-recourse loan recourse, but I believe that was repealed.
California, yes, purchase mortgages are non-recourse. Refis lose that protection.
Texas, no. Mortgages are full recourse.
There are only 12 “non-recourse” states. These are the only states where homeowners can walk away from a residential purchase mortgage without fears of being hounded by a bank (in some of these states, lenders may have recourse with other types of mortgages, such as a refis).
RightNYer, I am afraid many of the purchases in residential real estate since summer of 2020 are going to end up in foreclosure or with jingle-mail going to the lenders. When you overpay for a property and the market responds to a soft to sinking economy, eventually in the near-future if not already, the scant equity that many of these borrowers have evaporates and they are underwater. Then if this buying-frenzy homeowner loses his or her job or jobs or a substantial portion of income, the keys will eventually go in the mail. Just saying that the crazy housing market we are seeing now will not end well. Never does when you buy near a market top or with home appreciation rates at multiples of growth rates in personal income.
Thanks Wolf, it looks like the chart I had used from years ago was outdated. I had thought California changed the law to allow refinancings to stay non-recourse, but maybe I was wrong.
David, I agree. Right now everyone is euphoric because the government is attempting to make it so that there is no pain from the recession. But unless the government can borrow/print our way out of trouble with no consequences, it won’t last.
When living in Tucson ’09-10 I helped a realtor prep a house for showing, just East of AFB. Paint splattered carpets we ignored, just tried to clean paint off kitchen cabinets and a few other easier things.
Pointed out to her that they not only grabbed light/fan fixtures, but cut romex off max short to up repair costs. No idea what they did to hidden plumbing. So yeah, people do get pissed when they lose home.
But I still don’t think that individual (or jingle mail by same) behavior is as bad as the Corporations that bulldozed brand new homes in Victorville, or took 100’s of brand new Honda 600’s out to sea off Seattle and dumped them overboard, or Simon’s jingle mail.
These are the folks that are supposed to be our “leaders”, correct?
And the leaders of the “supposedly” much more “efficient”, Private Sector?
What’s good for the goose is good for the gander.
Many of the touts for REITs have pushed Simon Properties because they “own the best malls that will continue to thrive.” Obviously that was false.
Deutsche Bank con not ever go bankrupt, the Gouvernment of Germany will bail them out with Taxpayers Money, any time.
Newly pull out of thin air taxpayer monies .
“Hey ma, look, we finally made it to Disneyland.”
Germany is just as broke as every other nation on planet earth at this point in time.
Throwing around phrases like slave labour is not good
The problems here are homegrown US – slave labour is a big no no
Except if they are prisoners. Than it is ok
Exactly, how much are the fire fighters from prisons paid again?
Selling a bargain at $130.4 million from a flight of steps……positively archaic. Over in the UK it would be called a “garage sale” though $10 would be about the maximum bid.
Union Pacific RailRoad was sold the same way. Today it is the steel backbone of a nation that only needs to use it properly. A pipeline to ports can flow in two directions with some good guidance. Malls are usually no more than old farmlands…they deserve to go on the block in the traditional manner.
American Malls used to be, once AND still are a largest corporate tax give away the easy living Banker, land owner, Shareholders enjoyed.
Now we are supposed to believe American Malls are horrible. That they are the downfall.
The truth is that the American malls always sold the unwary buyer regularly and the same stupidity.
So now the buyer is no longer a tax give away there is a problem.
How will the corporate land owners with insufficient corporate mall sales pay FAIR share?
The corporation won’t pay fair share and never will.
But the corporate rip off will get real busy arguing and making sure that they have the last word.
Please explain the “tax giveaway” part. I bet I am not the only one that did not understand.
lolol..even then Thomas Crown would have said ‘you over-paid!’ aloha amigos
You watched The Thomas Crown Affair .. it was a messy heist .. too much emotional unhinge .. today no one ever leave the building & the job goes unnoticed.
It was merely an ‘old school’ feeble attempt at Humor..regarding the 10.00 garage sale quote..lolol but you have to admit..the Chess game was massively sexy for its time aloha
Imagine that a lot of the banks’ assets are in that same situation: there are no purchasers who are likely to pay anywhere close to the book value at which the banks have their “assets” reported on their balance sheets. I believe that this story reveals a GIGANTIC amount of corruption in real dollar terms, enabling massive, fraudulent transfers and concealing insolvency among banks/Wall Street entities, which the “Federal” Reserve has been complicit in concealing for years. My belief, for which I cannot state any reason, is that this has been going on for more than a decade in many areas by many banks.
Thus, if these banks were dissolved by a non-corrupt, third party, agency (if there were one), they would be revealed to have been legally insolvent (because the realizable, net FMV of their assets had been below the amount of their total liabilities) for years. That would mean that their dividend payments and other transfers of funds, e.g., with outrageous benefits to shareholders, would have been fraudulent transfers under most states’ laws and/or illegal distributions under other states’ laws FOR YEARS for which the corporate officers and shareholders (often the beneficiaries of these corrupt payments which their “Federal” Reserve has covertly enabled, e.g., by buying $2 TRILLION in mortgage-backed securities to bail out banks) would be liable.
Because of the powerful banksters involved, I predict that nothing will be done as to that corruption, as only fake reforms were enacted after the 2000 to 2009 Wall Streeter frauds. I use the earlier date because the bogus, for-inflated-values-designed-to-be-uncollectible securities that the banksters were selling to the dumb money were profitably sold for years before they needed to be bailed out.
The banksters made billions or trillions from such frauds for years before they finally got their free TRILLION dollar bailouts from the “Fed” and the US government. See
Of course, after all of the alleged “reforms,” the “Federal” Reserve just had to bail out the banksters again in 2019-2020 by buying their garbage, uncollectible, mortgage backed securities. See
What amazes me is how long the corrupt have been getting away with this kind of thing in so many, many areas. Do most Americans have to get hit on their heads by 2 by 4 foot beams before they notice the corruption?
I learned shortly after I became an attorney that the legal profession was utterly corrupt: with many, many attorneys paying non-attorney third parties to create fake cases. Many, many others being preferred because they clean out files of damaging information, do not produce damaging documents, and coach witnesses to lie.
Personally, I actually had a woman who stopped suddenly for no reason in LA after I had gotten an expensive sports car and when I was easily able to brake fast enough not to hit her old SUV, she actually backed up to try to hit me to try to create a fake accident. I yelled at her but was quick enough to back up faster than she did for about one block while blowing my horn, so she finally noticed the bystanders staring at us and drove off. I gave up on the corrupt police.
The labor authorities in California are similarly utterly corrupt: the FLSA ignores and does not investigate or even contact persons reporting labor violation cases against connected persons or companies. One complaint about a worker being used to commit tax fraud was just closed without even a phone call while when emails to that agency asking about the case were evaded and the FLSA responding person would not identify him or herself.
The workmen’s compensation court has allowed persons to just remove and destroy papers filed by corrupt attorneys, so that persons who already appeared, filed papers, and were recognized as employers (for example) later reappear and claim that they were ignorant of the cases for years, while the judges seem to have amnesia about the whole thing!
The IRS and FBI also do not take action against powerful, connected persons. Real estate (RE) boards do not even open cases when corrupt brokers defraud their clients, despite complaints being made to them. E.g., I obtained a $700,000+ judgment after diligent efforts despite the constant bragging of two attorneys representing a certain RE attorney that they were so connected that I had better just drop the case and accept money from them under the table, which I successfully defended on appeal, against a powerful RE broker of the right group, whose attorney basically bragged of his parentage from a member of organized crime, and after I did, my client and I actually faced harassment in the courts.
Nevertheless, I then sued the broker’s relatives to whom he had fraudulently transferred his assets and income for years. During this time, the one, honest judge who had entered the $700,000+ judgment was moved to the court of appeal, so we got a judge from the same group as the “connected” lawyers, who had claimed that they were so powerful that they did not even have to produce documents in response to discovery demands repeatedly, before the honest judge later ordered them to do so.
After a settlement that I was not happy with, I ultimately learned from third parties that the new, corrupt LA judge of that same group had talked to my client improperly, terrified him so he actually, physically shed tears hysterically to me for us to just settle the case while he never ever told me the reason, and convinced him to take a settlement sum that was below the value of one of the many houses of that corrupt, RE broker’s families that we had previously located and were planning to have sold to satisfy that FINAL judgment. After the settlement, the RE authorities never even responded to our prior complaints as to the broker, to which I was looking forward to responding.
Also, ALL RECORDS of that corrupt, RE broker’s judgment and of other, prior suits against him suddenly DISAPPEARED from LA county superior court and appellate court records! I have copies of the documents and some are still stuck in certain public records, but if that RE broker defrauds another of his clients, for which offense he had been sued repeatedly, that newly defrauded client will never be able to prove that there was any judgment for fraud against that RE broker again.
He will be able to claim to a later jury that he never had a fraud judgment entered against him! Similarly, now, the evidence of corruption by real estate brokers and hedge funds has become publicly admitted and blatant. E.g., watch “How Hedge Fund Billionaires Are Crushing GameStop Stock” at casgains academy in youtube before it is removed or censored.
I wonder if Americans will finally demand that their congresspersons take action at least as to the SEC (called the “Society to Enable Corruption”), which is probably again sitting on its hands as it sat on his hands FOR YEARS when it was repeatedly warned about the connected, Bernie Maddoff’s corruption until his own family member reported it. (Did they report it to get police protection from their defrauded clients who had accepted remarkably high returns for years without questioning how they were procured and might have left them floating in some pools somewhere? I suspect the latter.)
The sign on the front of the SEC sigil should be drawings of the see no evil, hear no evil, and speak no evil monkeys, except perhaps a last monkey should be added which always keeps his head stuck in a whole in the sand, because he does not notice any corruption among the connected. Why do you think that entity’s leaders and TV personalities have been hired for years? Because they stand up to corruption, or because they go along with it and do not report on it?
As Forbes reported, 15 billionaires now own US media, so the media has utterly abandoned its investigatory role. Watch other countries’ media to see how real journalists investigate stories and do not just public word bites repeating whatever the powerful want said, even false stories to manipulate stock prices! We will see if the new administration has a reformer head the SEC or just another enabler.
Not to defend it by any means, but Deutche Bank is being made the Martha Stewart of banks: selected to be investigated, because it does not have enough connections. The lesson to the ultra-rich: “pay your bribes, people, because you will not be protected unless you are connected or have paid generous bribes!”
Australian: The ABC network is given $1,000,000,000 plus each year to lie for the government & any & all deviant entities & their activities.
We have just had a very expensive Royal Commission into Aged Care ..
“Dear God, please let something come of it.”
The Aust. Gov. gives much monies toward the Aged Care Package .. so that Aussie oldies can stay home as long as possible .. it costs 10 times more to have them in Nursing Homes .. I did 8 weeks of respite at CraigCare aged care facility & spoke to many men & women who did not belong there but at home .. because the body that doles out The Aged Care Package .. ACAS .. is hogging the monies for themselves.
Today that money will be twice bigger & still it will not reach the oldies who need it unless the aged care industry is not privatised & regulated accordingly.
Ma & Pa Kettles Religious Ministries are in charge today & what a shambles.
How socialistic! In the USA, we have true capitalism: the 15 media baron billionaires (whom Forbes Magazine reported own US media) apparently hire their own media reporters to lie to the public. LOL. US media only reports nonsense and heart warming stories to keep she sheeple nice and docile.
Our “Federal” Reserve is creating US money to give to billionaire banksters and concealing their financial gambling and insolvencies, so that the social security payments that our elderly will get will just about be barely enough to buy them a coffee. The rest of their food will have to be dug out of trash cans or from charity. That is capitalism for most (and socialism for the rich banksters, but that is a secret that the sheeple are not allowed to know, so sussh), which is the American way. Sorry but whatever you might say I can prove that in the USA we grow the world’s BIGGEST, champion crooks! They are our only remaining, World-leading products, sadly.
I almost forgot, since I suspect a lot of judges and politicians are like those in LA county, our judges and politicians take bribes routed through claw firms and by insider stock tips. That is why they are almost ALL millionaires when they leave office even though their salaries were a relative pittance and income reconstruction (If the SEC and IRS ever investigated them) would show they spend more than their salaries.
That is the world’s greatest corruption, which has been successfully spoken sponsored by the world’s biggest parasite and organized crime cabal: our very own “Federal” Reserve, which is actually owned by the banksters who own its district banks indirectly —-SHUSH, do not tell the steeple!.
Law firms not “claw” firms, darn spell checker; and sponsored not “spoken sponsored,” grammar checker!
Thanks for disclosure on justice/legal profession corruption, from the inside. Would also like a chiropractor to come clean here (heard many stories from those that were back from chiropractic, and taking pre med, as they just weren’t good enough at selling themselves, and felt a solid MD ticket would make them more money) Also would like to hear from Pharma insiders and some docs about who gets bought off for “more money”. And ESPECIALLY a reformed mega preacher.
At least the top (and lesser, “on their way”) business people are more or less expected to be corrupt.
Wolf speaks the lingo, and spills beans, and in a usually understandable (for me) way.
Peak homelessness and empty shopping malls… a match made in capitalism heaven
There once was a man from Nantucket
Who walked the mall with no wallet
He said with a grin, avoiding “Kiosk Gywnn”
I love my free gym and hope it never plummets.
I sold most of my shares of a REIT after holding 14 months and made around 25% similar to the stock market. But if you had bought at the low $4 and sold at the high $22 in last 12 months you would have made 500% plus. Sometimes there are opportunities in out of favor stocks.
This is everything that will happen when mixing commercial with retail banking interests.
I am just glad to finally see something undergo price discovery. This is just a start in inflated asset America. I hope a homeless person wandered by and waited for the attorney to finish his diatribe.
You just lost 1000.00
We will have price discovery or it will all be owned by central bank. If you use any long term measure such as price to sales, market cap /gdp stock market is over valued 3X. If you use ZIRP forever then S&P is under valued as dividend is 1.5% and economy will eat itself up as Fed supplies funding for government to pay people to stay home. Debt binges are always one way sugar highs that require more and more til something breaks.
I know I ounce had a DR.
Yes, long overdue. More to come.
An aside but related. Jingle mailers in the UK, for domestic properties, often have a rude awakening years or decades down the line. The banks give a list of names etc to insolvency practitioners and a person who had put to the back of their minds the scenario that drove them to hand back keys and built a new life with new assets… is shaken down for the old debt.
Only way out would have been to hand back keys and declare bankruptcy.
Sorry but what you are saying is not actually correct whilst you are right that sometimes the Mortgage company or Bank do try and come after their previous client. But and it’s a big but if they have not kept in contact and made demands for payment and over 6 years has passed they will find the debt has been statue debarred. Although if the person they are chasing is unaware of this bit of law they will of course still try it on. Please don’t ask me how I know but I do UK property crash in the 90’s and effects of the Gulf war meant I gave back the keys to a flat but thankfully didn’t have to declare bankruptcy. Forward to 2002 and suddenly I get a demand from ex mortgage company for an absurd amount much greater then the original mortgage value amount remembering I had paid and deposit and for an indemnity policy and they got the flat back to sell to but somehow thought I now owed them more then the original loan some how. I took great pleasure in telling them the debt was statute debarred and to stick their claim where the sun don’t shine.
Rick McCrank from “Abandoned” will be loving this news. A million square feet of skatepark for the local kids coming soon. Bird is the word.
Give Antonia Hunt a through read mate.
She is the author of Little Resistance.
Not for the financial warily but those for escapism.
Covid was the catalyst to the devaluation, and to the 40 years of demand side savaging, already underway pre-covid, since 1980. Sadly to say. Fed and Govt Policy since 1980; world wide in the West. Not happy about it. Just reflecting. Heads up; more skill is need to “invest” today. IMO, there are solutions; but too few are talking about that to work out a pathway, and there is no leadership from govt except, conflict, mud slinging, trough sucking, from either the Dems & Reps. While people & corporations are shifting to expectation of govt handout for support, reality is, solutions will have to come from communities working together. Right now it’s: win-lose, and handouts/bailouts/fiscal/monetary/public services/etc are not work well. Both the supply side and the demand side of the economy have to be working together. Has to be win-win. There is a need to work on problems with out the binary paradigm lock up. Just what think.
Interesting that mall owners can just walk away and not be hounded by banks. Thanks Wolf.
The malls will be turned into “autonomous” tent cities
with Wi-Fi, so residents can Pump&Dump DogeCoin.
Looks like to me Mall owners are more like Mall finance brokers and don’t actually own much of the mall at all as it’s all financed through mortgages so debt. So of course as they have already cashed out by the mortgage advance and used the rents to pay the mortgage as soon as it now no longer works they just walk away with who knows how much having been made? Even if not maybe by the company in profits but in salaries to those in charge.
I would like to see these malls torn down and replaced by farmland, trees, and bird sanctuaries. At least that would lower the temperatures around these hot urban centers, and improve the quality of life for the people in the community.
I haven’t been to a mall in the last 10 years and don’t intend to go to one. Don’t need them, don’t want them. Let them all go bankrupt.
“I haven’t been to a mall in the last 10 years and don’t intend to go to one.”
Me neither, but then had to when the state motor vehicles office moved into our sole local, near-abandoned one. They must have gotten a sweet deal.
More like some politician with a financial interest in the mall got a sweet deal. I will bet the DMV pays the highest rate in the mall.
We often go to our local mall to parkfrom all over, then car pool in a vehicle to a nearby main street that has limited parking. Then back at the mall Starbucks, we use the bathroom, eat the lunch we bought on Main Street and hang out for a while.
It’s fun thinking of ways to parasitize the enemy the way they have done that to our communities.
One long and hyphenated word: brick-and-mortar.
It says a lot! “Step right up and burn your money here, folks. German investors especially welcome.”
Is it worthwhile to recall that private banks create spending by issuing debt, not new money? Private debt that cannot be paid will not be paid. That’s what the ‘bank’ part of bankruptcy means.
I take back what I said earlier. I did go into Mall based Macy’s 5 years ago to replace my wallet that fell apart. When I got to the place where the wallets were sold the whole place was in a disarray. Wallets misfiled, on the floor, no price tags etc. No sales personnel were anywhere to be found. I got someone from another department to come over and assist me with the check out procedure. When I went to pay they said they had no change in the cash register to process a $25 purchase. The dude had to go to the other side of the store to find change. He then wanted to know if I wanted to open a Macy’s charge card.
I had a similar experience at JC Penney’s a few years back. The real reason that I’ve found that retail shopping is so painful is that the clerks, who are probably paid very little, just don’t care. As an example, it’s common sense when you’re running a retail store that if the lines at the registers start to get long, you have other people doing other tasks like paperwork in the office, stocking, etc. come to the front to open up registers.
Government offices like the DMV and Post Office never operated this way, because they knew you had no alternative and didn’t care. That’s why you’d see one clerk at a register while the others were lazily sauntering around doing other things.
In the past 10-15 years or so, I’ve noticed that most retail stores (outside of expensive boutiques where the owner is actually working in the store) have begun to function like government offices.
I can’t count the number of times at chain stores that I’ve given up during checkout because the lines are long and not moving.
It’s no surprise that brick & mortar retail is failing.
“I can’t count the number of times at chain stores that I’ve given up during checkout because the lines are long and not moving.”
Ergo, the increasingly common implementation of self-checkout lanes. Lower mtlabor costs and better service — one’s self!
MiTurn (and others):
Too many consumers believe when arriving at the check-out in most of their favorite shopping haunts from grocery to dry-goods, if the lines are “long” then the employees in the checkstands should call for more checkers. In most instances there just aren’t any more “checkers”. If other employees are seen working stock it’s most possible they aren’t qualified to operate a check out position. These are management decisions; “…..a sort of, ‘manpower appropriation’ program. Only so much labor allocated to the facility according to the “times” of the day/night of operations. Too many times in these programs there is no management around to answer to the impatient, irritated shoppers who in many cases take out their frustrations on the person operating the check stand they are waiting on.
So next time u are in the position of being “irritated” because the lines are long, don’t blame the individuals operating the checkstands. Look for management.
Sierra, I’ve never blamed the checkout people. I blame the managers for letting it happen. Too often, I’ve seen them screwing around at the customer service desk doing paperwork because god forbid, one of them should deign to open up a register!
If thee is no one to take your money then it must be free. Walk out the door. Good use of your reusable bags.
These malls are an end of an era. The Yuppies and even more so, their parents. These are the generations that had the greatest amount of disposable income to waste due to the unique economic circumstances of the US coming out of WWII and through the 1960’s.
The younger people don’t care about this near as much (partly because they don’t have the disposable income and partly because they have different pleasure sources) and what they do need they do online.
Even online retailing will flounder in the coming years.
Sorry no. In the 1960s, most families owned one car. A middle-class house had three bedrooms and one bathroom. Few houses had air conditioning. The grocery budget consumed over 20% of household income. A typical house had one black-and-white TV and one phone. Up until airline deregulation, only 2% of Americans had ever flown.
D Ricardo, you are totally correct. I grew up during the late 1950’s and 1960’s and we certainly did not live the high life, but were very happy for what we had. Oh, and we knew how to save for the future!!
You know, it wasn’t so much “glad for what we had”, but parents knowing beyond a shadow of a doubt we could KEEP what we had. Parental stress easily screws up kids, plus all the mom’s were always home. (non-whites weren’t included in the party, in the South and maybe other “flyover”, although there were some Mexicans in our housing tract and the school was 1/4-1/3 black, as we were were close to the worn out old homes between us and downtown, where they all lived.
Also Bakersfield then was rolling in oil, cotton, etc, so ALL students got a world class K-8 education. We even had a large section for disabled, learning disabilities (mostly polio).
McKinley grammar school, now combined with Emerson Jr High next to it.
And it WAS the “high life”…..we honestly could care less what richer folks were doing, never even went to College Heights, etc, to see.
Still maintain thesis that nobody screws with fathers who had been doing nothing but some aspect of killing for 1-5 years, as being partially responsible for our good fortune. Most everyone’s dad still had (or cheaply bought) their Garand, or carbine, or 45, or all. In fact if one’s old man had picked up a Luger….extra kid bragging rights.
And people are out a couple times a year, not a couple of times a week. And didn’t spend 1/4 of income on kids activities.
Digging trenches, building forts, and having dirt clod wars was cheap. No “I got you, no you didn’t” cap gun arguments. Even had sort of Geneva Convention punishing those who used rocks. Super hard dirt Central Valley sun baked clods could draw blood with good forehead shot, as it was.
Small amount of Xmas stuff was forgotten in 2-3 weeks.
In the 60’s and 70’s the husband earned enough to support the family.
Same or even less ”stuff” growing up in mid 40s to early 60s dr:
Phone on the wall was on a ”party line” at first, one car, mom and help did the laundry first in tubs in yard, later with a new fangled round machine with the wringer above on one side, then hung wash on the clothesline.
No TV until mid 50s, so we listened to radio: Shadow, Amos and Andy, ball games, and through the miracle of AM waves bouncing, WLS a thousand miles away with actual music…
Christmas usually meant one toy, the rest clothes, etc., one string of lights that went out when one bulb burned out, as they did frequently..
But lots more freedom for kids to go all over town, especially in the summer when the winter residents were gone, end of March or April at the latest since no AC.
I would feel sorry for younger folks, but seen recent young vacay in Bali area, etc., where I was only large gray ship.
Looking forward to perfection of tele-transport; seems they are getting closer by the week!!
This was in Florida?
Yes, SWFL below Tampa,,, rural and then into what was then a very small city most of the year, now just another small part of the megapolis that stretches from Tampa to Naples with hardly a break.
In the USA, yes. But in many other parts of the world they’re going strong. At least I can say that’s the case in all of the cities I’ve visited in Asia in the last 5 or so years.
A prime location for a hospital, an apartment complex, or an Amazon fulfillment center.
In other news: a Wall Street Bets trader alias DeepFuc*ingValue lost $19 million speculating in Gamestop stock.
I do not believe the govt will bail out commercial REITs, as giving $50,000 free money for college loan debt forgiveness, to the tune of $1trillion, buys millions of votes; but giving $1 trillion to a few thousand commercial property owning businesses buys only a few thousand votes, and maybe a few million in lobby money annually. At this stage the Magic Money Train is kind of easy to predict, as the govt agents determine how many votes they want to buy in the future, that is where the majority of “free money” will end up…
That said, the govt, via Fed fear mongering, would probably bail out the banks that take commercial REIT loses. Seems Wall Street is making that bet right now as the banks stocks are up 30-50% in the last three months.
Government is speeding up the implosion. Printing money means you can fool most of the people that forgiving student loans has no consequences, real negative interest rates has no consequences, rent moratoriums have no consequences, off shoring manufacturing has no consequences, Tesla consuming capital for 10 years and Musk being richest guy around has no consequences. The world has been turned into debt crack addicts with margin debt at all time high as stock market is all time high. Somebody is going to eat the losses when the bell rings.
I hope so. I want to still be young enough to help pick up the pieces so my sons don’t have to.
“If there must be trouble, let it be in my day, that my child may have peace.” – Thomas Paine
Right, I think at least 2x future generations are going to suffer in their standards of living for the sins of us in America today for spending that which we have not earned and living only for today and not saving for tomorrow. There may be few visits to our gravesites, but I will be scattered to the Wind.
I’m a consumer bankrupty attorney in a “recourse” state. In over 30 years I can count the deficiency suits from mortgage foreclosures on one hand. Never happens with a nationwide mortgage company, only from local creditors such as credit unions.
Rob, I think that’s because most lenders know that they’re not going to get blood from a stone.
Most people get foreclosed upon because they can’t pay. What’s the point in spending $25k in legal fees (or more) if you won’t realistically collect anything?
Hmm, on second thought looks like the govt is goint to bail out a few of the commercial REITs, as there is a $30 billion “Gym Relief” bill in the House that looks likely to pass..
On a side note, there is a bill for “Baby Bonds” in the house that has a good chance to pass. $35,000 given over 17 years for each newborn ($2,000 per year for years 2-17, $1,000 when born). What is facinating is they are guaranteed 3.0% interest, and are risk free govt bonds. The AARP should get the govt to pass “Retire Bonds” so senior citizens can get a safe 3.0% yield, although that might hurt the stock markets so not likely. I’m not of retirement age myself, but I know a lot of retirees who could really use a safe 3.0% yield right now…
Yort, the lost interest to American savers since 2009 is on the order of some $16 Trillion. And we should keep the Fed as it operates today??? Who has ZIRP really benefited and we know it is not Main Street? Misprice money, and money get mis-allocated. Bing, Bang, Boom.
The details on the baby bonds will be interesting. Do the benefits come with each newborn, or do the already-born children in families get grandfathered in, so to speak? Is this a massive government vote-buying give-away bill for all the Dreamer out there who are about to become citizens?
Both team red and blue want to move the existing child credit from today’s $2,000 per year, to at least $3,000 per year, and even more if the child is under age 6. The devil is in the details for team red though, as lots of current exemptions get axed, such as SALT, for the red child $3k plan. Really what we have to team red and blue using “free money” to buy as many votes as possible. This could last and entire generation, or fall apart much, much sooner. What I can say is both red and blue seem to want to help those families who make under $100k the most, and all help stops once you make $400k or greater, and actually anyone who makes more than $400k is going to get spanked over the next four years, starting in 2022 as 2021 is too soon to modify tax code to spank covid taxpayers on any level. Although the wealth tax of 2% for those who are worth more than $50 million is gaining steam and could get passed this year. It will not catch many, although I think many small businesses will get caught up in proving, via a lot of paperwork, they are worth less than $50M. We all pay a price when the laws get complicated. The first thing team blue did was remove team red rule that for each regulation, two have to be removed. I really do not pick a side when it comes to red or blue to be honest, but forcing less two rules to go away with each new rule was logical, else every day our system or existence only gets more complex…
The so called “wealth tax” will be declared unconstitutional. It is a “communist” concept to seize personal property. It is a tax on all wealth, at beginning 2%, each year! This would include homes, cars, stocks, etc. This is a tax on after tax dollars in many cases, and annually, will in my opinion, not be deemed constitutional.
When top 10% own 97% of Wall St wealth and the top 3 rich person more than the bottom 160 millions, there is crying need for wealth tax. Middle class hardly exists, with stagnant wage growth since late 80s!
The Top 10% Is Doing Just Fine, The Middle Class Is Dying on the Vine
For law offices the US Code (i.e., the codified general statutes) with West’s annotations fills 356 volumes and takes up 55 feet of shelf space, retailing for around $6,500.
The Code itself, from the USGPO, is in 35 volumes of around 1,200 to 1,400 pages each, including 6,850 pages of index in 6 volumes and one volume that is nothing but a 1,400-page LIST of the other public laws that have not been codified (e.g, the budget, etc).
Then there is the Code of Federal Regulations, for another $1,400 or more for a subscription, for another 20,000 pages.
Candyman…..much less messy for people to lose some of their “hard earned candy” to gov’t rather than thieves, yes?
I’m actually hoping we have a currency crisis. We need to be taught a lesson. And no, the other countries are NOT doing the same. On a per capita basis, our printing/spending eclipses all of the rest of the developed world.
You are technically correct, but only because China resists being upgraded to ‘developed’ so as to avoid numerous penalties and to receive regulatory ‘slack’ given to ‘developing’ countries. This is part of its (and India’s) defense to its ongoing expansion of coal use.
Not sure how much the huge US stimulus re covid changes things, but the Chinese credit explosion from 2008 until 2019 was the largest in history. Now the whole financial structure looks fragile. In the past few months there have been several defaults on supposedly government- backed bonds. The info I just dug was from mid 2020 (Bloomberg)…in June /July there were three bank runs where crowds gathered to withdraw.
Those Swiss Francs are looking better every day. Time to convert dollars to SW and stuff them in your SDB. Good diversification move.
Make sure you get the series 9 banknotes. They should be good for 10-20 years. The Swiss National Bank intends to communicate the statutory recall of the banknotes from the eighth series two months in advance in the first half of 2021.
Singapore Dollars even better.
Creature, any country whose Central Bank gambles public funds in the now highly speculative equity markets and on a grand scale has a currency I no longer want. It ain’t the Switzerland of our grandparents. Monkey see, monkey do. How about creating wealth in one’s own country, the old fashioned way of achieving currency stability??
There ya go Dave,
How about a Green New Industry?
Congress giving money away. Nearly all of us worked and have to save or invest for when we can’t work. Money is supposed to allow us a means to store our earnings to provide for our needs in our later life. It’s constantly diluted by government passing out free money or by the inflation tax or by taxes. I think they are intentionally trying to run the ship aground.
OS, apparently we were born too soon to enjoy this free stuff. But from my perspective I think we got more out of life than these kids will have available. As for an intentional grounding, it’s more like driving the ship onto the rocks at full steam.
So, let’s me see if I get this.
Business takes.loan to buy a mall.
Business buys a mall.
Then business takes another bigger loan with the mall as collateral to pay the first one, knowing the mall is gonna be worth less when is time to pay the mall loan.
As soon as the mall is worth at least 30% less that the loan they just give away the mall and walk away of the debt only they are now debt free.
Is this how it works?
No, it works more like this.
You take a mall that assesses at $250 million, and get a $200 million loan secured against it. The loan is a 10 year fixed rate loan, but amortizes on a 30 year schedule, so at maturity, there is a huge balloon payment due.
If all goes according to plan, the rent payments from your tenants cover the mortgage payments, taxes, insurance, and then some. You then use that money either to distribute money to your owners or to pay the equity portion on a second mall (the equity portion, in the first example, being the $50 million the sponsor had to put in).
At maturity, you still have $150 million in principal left. But no worries! The mall is now worth $300 million, so you get a $240 million loan. You use that to pay off the $150 million, and you now have $90 million to play with (either to buy/build other properties or take profits).
The above is if everything goes as you project. If it doesn’t and you are unable to secure new financing at maturity (because the mall is now only worth $120 million, so there’s NO way you can get a $150 million or more loan to retire the old one), you either have to put in your own money or hand it to the lenders.
If you don’t think the value will increase any time soon, you hand it to the lenders and move on to something else.
Then why are they still giving loans? Malls have been an evident losing business since at least a decade ago and nowadays they are a blatant money sink.
my wife was shopping at this mall the other day and said it was a ghost town and very run down. There was a rumor that Kennesaw state university was in talks to buy it but haven’t heard anymore about it.
I tagged along with my wife last weekend Wellington mall
have not been in at least 2 years same here not many shoppers
and its polo season. SPG owns the property , land is probably worth
a million an acre. High end condos being built behind it.
These dying malls in expensive neighborhoods have to have an impact on the local residential values. One of the reasons people move to expensive neighborhoods is for the nicer stores and services.
There’s a guy down in souther CA who does videos of his town, Palm Desert(I think). He shows all the deserted malls, talks about the local economy dying, but never discusses the residential RE values in his town.
Recently stopped at the “shops at wailea”, very up scale small mall on Maui, “vitton”, and other high end stores along with mixture of mid range stuff. Vacancy rate judged by empty stores about 40%. Shoppers at about 2:00 PM almost none. Another 30% of stores looked like they were just hanging on – 50% off sales, etc., Granted Hawaii has had big big tourist reduction from covid, but this mall is adjacent to multi million dollar homes, private jets fly in and so forth, caters to very high end clients, you know $200 t shirts crowd. A shave ice store recently opened and signs everywhere in mall touted this as a big deal. Oh well trouble in paradise.
I do not know how this can happen.
Many of those stocks involved in this weeks short squeeze are retailers. If the retailers are doing well , then the mall owners should also be doing well
The retailers are doing shitty. GameStop’s revenues plunged by over 30% in 2020 and by over 50% since 2016. Lost money for years. And this was the #1 hero of the short squeeze.
AMC, the theater chain, is trying to stave off bankruptcy, and it was the #2 hero of the short squeeze.
There were real reasons why these companies were the most shorted stocks — because they’re shitty companies with collapsed business models. The problem is that everyone shorted them, which made the shorts vulnerable to a short squeeze.
I have seen the writing on the wall with movie theaters for years. There used to be something fun about going to the movies, because you had a huge screen with a great sound system. But now, people no longer have 27 inch CRTs at home, but 75 inch LCDs. Not as big as the movie theaters, but still big enough. And they have great soundbars that pack a lot of punch into a small piece of electronics. Sure, you got to see the latest movies a few months early, but many people don’t care about that.
The above caused attendance to drop, which means the theaters had to raise prices on the remaining people, causing attendance to drop even further in a feedback loop. A family of 4 would have to spend $50 now at a minimum, and that doesn’t even include all of the concessions, which are extremely unhealthy and expensive.
I haven’t been to a movie theater in at least 3 years, and I don’t miss it. I’d rather watch something at home and be able to pause the movie to use the bathroom or get a drink.
75 inch LCDS? A sound bar? That’s nothing!
How about a 150 inch, (12 foot 6) screen?
Take a blank wall in your garage, mask it, paint it with the correct paint, buy a 4K video projector, an off the shelf 5.1 surround system with speakers, hook up an old laptop with an ethernet cable to your router, and you have the equivalent, or better, than one of those postage stamp theaters they jam into a mall. Total cost, 2500 or less.
Painting the screen and mounting the speakers is the hardest part. The sound system comes with a mike that you put where your head goes and it automatically balances the sound.
To hell with Hollywood!
The malls shut down old main-street in most cities during the 60s and 70s. How glorious the fancy air-conditioned walks and indoor shops under corporate franchise control. It seemed retail changed almost overnight along with the passing of mom-and-pops and one-owner businesses.
Good thing we have the FED to keep the giants in control, otherwise, in this crashing environment, independent business ownership might threaten to come back into style.
Rain or shine, the stock mkts are NOT broken but making new records almost every day. Now 1.9 T is on the way, more punch in the bowl for the party.
Only two things can corrode this paper wealth from within, hardly will be noticed until the last stage, like TERMITES inside
1.DEBT servicing – when there is NOT enough income (revenue) stream for payment of interest on the debt. Meanwhile inflation may flare up beyond Fed’s control!
2.Covid 19 will slowly sap the strength of the global economy, with flares up and down. As the gene sequencing continues, more mutants will be discovered on the way.
What about the responsibility of Mr Simon and his credibility. He should be put in a debtor’s prison. He has conned these banks.
Isn’t trying to sell interests in mall properties, a bit like selling tickets for the Titanic’s return voyage after published reports of it striking an iceberg?
Respite ouch ??
No, they lent me a wheelchair, my room was down the hall & left & all the way to the end, there was entertainment, I needed an envelope from the office, as I turned the corner, the singer began a song I know, he on the mic & I out loud sang together, Frank, the wedding singer & I were fantastic.
Simon used to own the mall where I live until 2020, now the Pueblo Mall in southern Colorado is owned by a small real estate company out of Dallas called Centennial. Several of the chain stores closed permanently during the pandemic so far but a couple of small, locally owned stores that were once at downtown Pueblo’s retail streets have opened recently in the mall. I’m guessing their owners got sweetheart deals to relocate, too.