Creditors Foreclose on Another Mall of Simon Property Group, Face Massive Loss

As largest mall landlord in the US sheds its malls, CMBS holders, such as bond funds and pension funds, take the losses.

By Wolf Richter for WOLF STREET.

After Simon Property Group, the largest mall landlord in the US [SPG], stopped making monthly interest payments in June 2020 on a $100-million loan backed by the 1.1 million square-foot Montgomery Mall in North Wales, Pennsylvania, the slow gears toward foreclosure began grinding. On August 31, a formal notice of default was issued, followed by a loan acceleration notice a month later. Now it’s over.

The creditors have foreclosed on the mall and have obtained a judgement of $119 million, including principal, unpaid interest, and expenses, against the Simon entity that owned the mall, Mall at Montgomery LP, according to court documents, reported by Philadelphia Business Journal.

Simon Property Group got rid of the mall at the expense of the CMBS investors – one of a number of malls that Simon has shed over the past few years to deal with the brick-and-mortar meltdown predating the pandemic by years. Each mall that Simon had shed produced big haircuts for the creditors – namely investors in commercial mortgage-backed securities (CMBS).

The original $100 million 10-year interest-only loan was issued in April 2014 by the Royal Bank of Scotland which split the loan in two pieces of $54 million and $46 million that were securitized in May 2014 into CMBS, with Wells Fargo as the master servicer.

At the time, CMBS investors felt good about their deal. The mall, which had five anchor stores and was built in 1977, had been renovated in 2008 and in 2014. Just before securitization, it had been appraised at $195 million. With collateral of $195 million backing a $100 million loan, what could go wrong? Nothing, of course.

Last year, the special servicer then managing the CMBS had the mall re-appraised, and it came in at $61 million, a 69% haircut from the original appraisal.

By that time, it became clear that Simon would walk away from the mall. Why make interest payments on a $100-million loan for a property that was worth – perhaps at best – $61 million?

The process of wringing out the creditors has become fairly routine. These CMBS are in some pension funds or bond funds, and who cares.

In November 2020, Kroll Bond Rating Agency had put Montgomery Mall on a list of four malls that Simon would likely return to lenders, totaling $411 million in mortgage debts. The other three malls were the Mall at Tuttle Crossing in Dublin, Ohio; Southridge Mall in Greendale, Wisconsin; and the Crystal Mall in Waterford, Connecticut.

In February 2021, Simon got rid of another mall that way, when Deutsche Bank foreclosed on a $178 million mortgage, spread over two CMBS, backed by 560,000 square feet of retail space at the 1.2 million square-foot Town Center at Cobb, in Kennesaw, Cobb County, Georgia. At the time of securitization in 2012, the collateral was appraised at $322 million. In October 2020, after Simon had defaulted on the loan, the value was slashed by 60% to $130 million. When Deutsche Bank held a foreclosure sale on February 2, with an opening bid of $130 million, it received no bids.

Simon’s $28 million mortgage, backed by the 426,761-square-foot Springfield Plaza in Springfield, MA, is also in the lineup of potential foreclosures, according to special servicer notes reported in August 2020. When the mortgage was securitized in 2013, the property was valued at $39 million.

It started well before the pandemic: In 2019, as part of the regular brick-and-mortar meltdown that has been going on for years, Simon shed the 1-million-square-foot Independence Center in a suburb of Kansas City, Missouri via foreclosure. When the mall was sold in a foreclosure sale in April 2019, the $200-million CMBS backed by the mall generated a loss of 75% for the CMBS investors.

In addition to the process of malls being returned to creditors, three mall REITs have filed for bankruptcy since November 2020: last month it was Simon Property’s spinoff, Washington Prime Group, following in the footsteps of two mall REITs last November, CBL & Associates Properties and Pennsylvania Real Estate Investment Trust.

Among the malls that are not being returned to creditors are those in expensive housing markets, where the land itself has a lot of value, and where the vast parking lots, parking garages, and some or all of the mall structures can be bulldozed and redeveloped into apartment and condo buildings, with perhaps a sprinkling of office buildings. This is now underway in many cities, including in San Francisco, and often a most welcome change.

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  147 comments for “Creditors Foreclose on Another Mall of Simon Property Group, Face Massive Loss

  1. Artem says:

    A rural mall in a town of several thousand wasn’t a good idea in 1977 and it didn’t suddenly become a good idea in mid 2010’s.

    • JRHill says:

      Heh, a small rural town…. As much as I appreciate Wolf’s stuff it is all about city centers. Small rural towns don’t count in the bigger picture. And I understand. Charts get all screwed up. They just can’t be included.

      • Wolf Richter says:

        Wait… North Wales is not “rural” out in the boonies, it’s a suburb within the Philadelphia metropolitan area. This here is a typical suburban mall, and it looks like North Wales has got a traffic jam right now on 202 and 309:

        • Joe Saba says:

          of course these single entity malls should have required SIMON to guarantee said loans
          oh, forgot they are part of the 1% GRIFTING pension funds and likes

        • George Speros Maniatty, Jr. says:

          I drove by there last week.

          Montgomery County, PA is a very wealthy area.

        • Petunia says:

          This mall looks like it was too close to King of Prussia, the shopping mall meca of Philly. I used to power shop in PA and I never heard of it. Plus twenty years ago, Philly itself could not be beat for specialty boutique shopping. NYC didn’t come close.

        • Artem says:

          North Wales is not “rural”

          Kinda is though. Maybe the mall operators were hoping the sprawl would catch up and swallow the mall, but Philly ain’t growing in that direction for whatever reason.

        • Dan Duncan says:

          Interestingly, it’s only 20-30 minutes from the Simon-owned King of Prussia Mall, which is much larger and appears to be thriving.

        • mark schulte says:

          It ain’t the Main Line but it is quintessentially suburban. . .

      • roddy6667 says:

        I had friends who lived in North Wales back in the Nineties. That town was at the edge of the suburban sprawl. All farms after NW.

    • Douglas Wells says:

      This is what too much easy money gets you Artem. Poor investment decisions and little or no consequence to the perpetrators. Rinse, wash, and repeat. Why shouldn’t the malls goes bust? That was America circa 1970s-1990s. Other than runaway inflation, that America is long gone.

      • otishertz says:

        The retailers in the malls today are all stock price hyping fronts. They don’t care about profitability. They care about Stonks. AMC, GME being prime examples.

        • HR01 says:

          otishertz,

          Don’t forget TSLA. Our local mall here in the Valley has a Tesla “dealership” inside. But also LOTS of boarded up spaces. Mall landlord doesn’t even bother with the ‘Coming Soon’ banners anymore because they have no takers at any price offered.

      • Artem says:

        Capitalism without failure is like religion without sin.

        Kinda fun! (for now).

    • MiTurn says:

      The one and only local mall opened in our county in ’84 and has never been full of tenants. Now it’s just tragic and an eyesore.

    • El Katz says:

      Montgomery Mall is a regional mall serving portions of Bucks and Montgomery County. We lived a few miles away from it in 1988-92. It certainly isn’t “rural” nor a town of “several thousand”. PA has a weird system with it’s townships… which skews the perception of outsiders with respect to the population. We lived in Upper Gwynedd Township…. next to Lower Gwynedd Township…. but our mailing address was Lansdale….

      The mall was on Rt 309 which is a major traffic artery in that neck of the woods. It’s located not that far from King of Prussia Mall… which is the big kahuna of Philly Malls.

    • K says:

      “Among the malls that are not being returned to creditors are those in expensive housing markets, where the land itself has a lot of value, and where the vast parking lots, parking garages, and some or all of the mall structures can be bulldozed and redeveloped…” I wonder what the creditors (and their ultimate, respective, creditors) do when the land is not very valuable and cannot be easily redeveloped: forbearance until someday the real estate gains in value, so they do not have to book huge losses on their P&L statement?

      Remember that the banks and their “Federal” Reserve previously concealed their bailouts.

      Are the Fed banksters are being honest this time, even though they are the servants of the Wall Streeters and bankster billionaires whose avaricious bets they effectively insure?

    • robert says:

      Somehow it ‘survived’ for 30 years, occupied, undoubtedly made money, was worth renovating in 2008, and was appraised at 195 Million dollars in 2013-14. It’s fair to say it probably was a good idea in 1977.

  2. James Quincy says:

    The unfortunate reality is that nothing will change or improve in this country until the majority of voters realize that there is no real fundamental difference between the Republicans and the Democrats. They are simply two heads on the same snake. They are autocrats. They are career politicians. And as such, their so-called differences are just a dog and pony show to divide the electorate and distract as many as possible from the fact that our government is a corrupt autocracy. Until we collectively demand and impose strict term limits, eliminate lifetime benefits for political “service”, and lock up the entire cesspool that currently occupies our Congress, etc. then there will be no end to the shortsighted and destructive policies coming from every branch, the Federal Reserve, the Treasury, etc. and the continued theft through runaway inflation, ZIRP, insider trading, political “favors”, etc. will completely destroy what is left of this nation. Furthermore, we must realize that we do not live in a democracy and never have. We live in a republic with a “representative” government that only represents itself and its cronies and enablers. One term of 6 years for the President, Senate, and House. Then you are out and have to find a real job and benefits like the rest of us. I realize this may seem a little off topic, but the truth is this is the crux of virtually every problem that exists in this country so it is completely relevant. Hopefully Wolf agrees and posts this for all to consider.

    • Harrold says:

      Yes! Politicians are behind the decline of malls.

      • Petunia says:

        In a way they are because they allowed the overbuilding of retail.

        • Harrold says:

          Should the government determine how many retail stores are allowed?

          Wasn’t that tried in Soviet Russia?

        • Anthony A. says:

          State and city governments generally want retail to expand because of the tax revenue it generates for them.

        • char says:

          Overbuilding? Malls that prospered for decades are dying because of “Amazon”. Not because of overbuilding

        • VV says:

          Agree on overbuilding….also Maybe stop federally subsidizing Amazon deliveries, make then follow reasonable labor laws (and finally internet sales are taxed to compete with local retail sales)

          Next to come commercial restaurant space.

    • Mark Tucker says:

      If recognized and acted upon, the truth shall set you free. Right on, James!

    • Old School says:

      Probably taking the Fed back to it’s original charter would help. They were just a lender of last resort to the banks. They couldn’t even hold treasuries. It’s morphed to a Goliath running the economy (into the ground).

    • khowdung Flunghi says:

      “…their so-called differences are just a dog and pony show…”

      You’re not wrong, but nothing new.

      Do a search for “Huey P Long on the difference between Democrats and Republicans” to see the YouTube video from the 1930’s.

      • JMG says:

        +1 for the Huey Long recommendation! He was a great man. Not a surprise the usual suspects assassinated him.

      • Winston says:

        Search on YouTube using this text string to find this outstanding 52 minute interview:

        David Stockman on Crony Capitalism (Moyers&Company) Bill Moyers (2012)

        Opening:

        “[Boies] Penrose was the United States Senator from Pennsylvania [In office March 4, 1897 – December 31, 1921] bought and paid for by the railroad tycoons and oil barons. They could count on him to deliver the goods. ‘I believe in the division of labor,’ he told his wealthy paymasters. ‘You send us to Congress, we pass laws under which you make money and out of your profits you further contribute to our campaign fund to send us back again to pass more laws to enable you to make more money.'”

    • Confused says:

      I view the Republicans as autocrats who serve the Top 1 Percent and the Democrats as plutocrats who serve the Top 10 Percent. In any event, lifetime congressional service seems fine to me as long as the voters agree. What isn’t fine is the bribery that occurs under our current campaign-finance system. A system of publicly financed political campaigns probably will cost Americans far less money in the long run.

    • LaToya says:

      Mr. Quincy,

      You are absolutely right. A system of “checks and balances” can neither check nor balance with self preservationists at the helm.

    • JMG says:

      While you’re correct about there being zero difference between Dems and the GOP, your solution of term limits will do absolutely nothing to fix the problem. All that happens then is that the puppets turn over quicker. So what? It’s still the same people bankrolling them into power. Term limits are completely pointless.

      The two party system is a total joke though, you are very much correct about that.

      • Mark says:

        “The two party system is a total joke though”

        Our one-party system is a complete joke …… FIFY !

        One party of multi-millionaires, with two levers to pull for your billionaire of choice.

      • Ron Tuckman says:

        JMG.

        It appears to me that Mr. Quincy not only makes some very good, sound, and valid points, but that his ultimate intent is to sound a wake up call and get the conversation started (or re-started) about what changes need to be made and what solutions are possibly still available to us as voters because it does also appear that we all agree the system as it is isn’t going to fix itself. So adding in some form of strict campaign finance reform would help too. If you have any other ideas, please share them. I, for one, would rather try to do something as he suggests than to sit back and just say this and that won’t work and let them continue slaughtering us.

    • Patrick Callahan says:

      Mr.Quincy:
      Your commentary deserves national publication and I have already copied it…..I consider it an outstanding definition of what the American citizen -voter is faced with today (and have been faced with ever since and including President Roosevelt) – and don’t forget the Federal Agencies – totally out of control and far too powerful – and I speak with some experience having been employed by the U S Treasury Dept. and by the Resolution Trust Corp. Absolutely on target……. Hats off to you Sir!

  3. Giorgio says:

    NO WORRIES!,,, The Fed says that we only had a 2-month recession that ended in April 2020!! ? So…No recession at all during the lockdowns and now that the economy is opening…it’s an “explosion” of growth! ? Well…that’s what the Fed says… In this case…no problem if malls face massive losses…everything is fine!

    • Mitch Stein says:

      Trust the Fed? Not bloody likely. Whatever happened to their primary mandate of price stability which is the only way to sustained growth and prosperity. All they know how to do is to keep pouring gasoline on the inflationary firestorm they’ve unleashed along with all the misguided and indiscriminate stimulus coming from the government. So what does Simon Property care? They’ll just write it off and pay no taxes.

      • Lance Manly says:

        The Fed does not have a primary mandate. It has a dual mandate.

      • Old School says:

        The truth has proven to be opposite to whatever the Fed has told us. They said balance sheet would be wound down after QE. They said inflation is transitory.

      • Yamo says:

        “Trust the Fed”
        Are yuo kidding? The Fed is the new clown in town…. A big joke with a printing press

    • RightNYer says:

      I mean, as long as we’re including government spending in GDP, then we never have to have a recession again. If it looks like GDP will contract by 5%, all the government has to do is pump 6% into the economy, and voila, no recession!

  4. MiTurn says:

    “mall structures can be bulldozed and redeveloped…this is now underway in many cities, including in San Francisco, and often a most welcome change.”

    I remember as a kid in the ’70s going to my first mall. So cool! Busy with shoppers, other young people hanging out, fun food at the small stands. Now, derelicts that I avoid.

    Times change.

    • curiouscat says:

      But abandoned malls can be fascinating places.

    • Harvey Mushman says:

      Well its been a while since I visited the big mall in my area of So Cal. It is about time for me to go and check it out. I wonder how many store fronts are closed?

    • Augustus Frost says:

      Same here. I have been to Town Center Mall on occasion. Its not close but not that far from where I live in metro ATL.

      Up until about 2005, I would go to a mall somewhat regularly. Recall going to Northlake Mall on a Friday night retuning from a business trip right before Christmas 2000 and looking out on the lower level where families with their children visited Santa. This was the mall nearest me in the 70’s. Now it’s a ghost town and presumably headed for closure.

      Now, the horrible traffic on most days is enough of a reason not to make a trip.

  5. otishertz says:

    This is inflationary, right?

    • Escierto says:

      In the Fed’s version of capitalism, yes it is, because no creditor bank or hedge fund must ever take a loss. I predict that the Fed will eventually print hundreds of trillions of dollars to bail out their friends. Toilet paper will be worth more than the Benjamins you will use to wipe your tushie!

      • otishertz says:

        I agree with your sentiment. I was asserting that capital destruction via defaults and value writedowns is maybe a teensy deflationary, at least in the CMBS space.

        I see a lot of trouble coming in the CMBS arena. You’ll know the infection became sepsis when the Rulers at The Fed start a program of systematically buying this toxic waste.

        Buying toxic waste seems to be their internal mandate/

  6. Trinacria says:

    The next 10 years of so should be “interesting” to say the least for so many things…how did that old Bob Dylan song go…”the times, they are a-changin”…

  7. Jorge says:

    Die economic parasites, die!

  8. DR DOOM says:

    MEH…….

    • 2banana says:

      Simon Property Group has doubled and then some from a year ago.

      So…I hate the player and the game.

  9. Brent says:

    This is sad…

    Every shopping mall is a world unto itself.
    Lot of interesting stuff happens there, especially if one looks with a trained eye.

    When I visit Chicago South Side I always shop in the zip code 60431.That particular K-Mart died after long agony and Wally Supercenter took over.

    Every day at 11:30A.M. a brand new BMW X5 (SUV-ish type of car) zooms in,a guy jumps out,collects empty bottles from garbage cans,stuffs BMW’s inside with full plastic bags-all in 7 minutes-and is gone !!!

    Jeez,he is brutal.No extra breath wasted,no unnecessary movement made-just like US Airborne Ranger running thru the obstacles course.

    Well,not to be outdone myself,next time it will be me practicing Michael Jackson Moonwalk at this parking lot.Because South Side is a Moonscape.

    WHEN YOU SEE ME-GIMME A WOLF’S WHISTLE !!! ?

    • otishertz says:

      Malls are just consumer cathedrals where peasants and petite bourgeoisie worship conspicuous consumption while trying to emulate their corporate gods by marketing and advertising their ideal image while ego broadcasting on social media.

      • Harrold says:

        Thats Instagram.

        Malls are where senior citizens go to get their exercise in the morning.

        • otishertz says:

          To quote a millennial:

          OMG !!! LMAO !!112 LOL !!!!!!!!!!!!!!!!!!!!!!!!!!!!

          ROFL

        • otishertz says:

          Forgot this part:

          :D

        • Brent says:

          @Harrold

          They are pretty feisty and well armed for senior citizens:

          ABC7:
          “Chicago rapper FBG Duck killed in brazen daytime shopping attack.The glass on a Dolce and Gabbana storefront was shattered during the attack, pictures from the scene show.”

          @Otishertz

          LMAO,ROFL…
          It is just Internet slang,kids are too lazy to type…
          I dont know French but my best guess they are speaking French in Chicago:

          “YO,Ouï,drop dem nikes off yo a$$ befo i blast u muther f-er!”

          Google Translate French->English:

          ” I admire your fashionable running shoes”

        • roddy6667 says:

          WTF?????
          GTFO!!!!!
          DIAF!!!!!!!

        • otishertz says:

          The new reliance on acronyms looks more like a deterioration in language and communicational ability.

          If i was bored I might argue that emoji communication is a pictograpphic language like japanese, or leaning that way.

          But I also have a hard time beliieving that a cat emoji gif crying in joy on repeat can have anything but a superficial meaning.

        • Harrold says:

          Acronyms were extremely popular back in the days of the telegram.

  10. Peanut Gallery says:

    What is going on with UST 10 Yr yield????

    Unrelated comment…

    • Old School says:

      Watch Steve Van Metre to see if you believe what he is saying. Says 30 year might go to zero and mortgages go to 1%. Fed’s got to take rates low enough to get bank lending growing to 6 – 8 %. Right now bank lending growth -2%.

      • Trinacria says:

        Check out the work of Dr. Lacy Hunt. Simply the best economist in the world. Steve Van Metre follows Lacy Hunt. Dr. Hunt’s macro view seems to make a lot of sense to me. Plus he had been very accurate for the past 3 decades or so.

  11. Don Green says:

    The Fed and JPow are full of you know what. They are lying. Based on the former inflation measure, true inflation is already at an annual rate of 13+ percent per John Williams ShadowStats. Read the article written by former St. Louis Fed chair William Poole about Paul Volcker and the Great Inflation of the 1970’s. It just about sums up everything that was done wrong leading up to that inflationary spiral and everything that was done to finally reign it in and just how quickly all of those lessons have been forgotten. In other words, politics as usual. As for this example of Simon Property, it is also the same old story of too much easy money leads to too much malinvestment and the rest of us get to pay the ultimate price for it through higher prices and the ultimate tax which is INFLATION.

    • Old School says:

      Listened to Neil Ferguson. He said most likely set up is similar to LBJ guns and butter and then high inflation.

  12. rich says:

    It must be contagious. And this is where the rich folks live. Right across from Wrightsville Beach, NC.

    “Mayfaire Town Center owner CBL Properties, which filed for bankruptcy in November, announced Monday that it has entered into an amended agreement that will allow the firm to proceed with its restructuring plans.

    The amended Restructuring Support Agreement (RSA) provides for the elimination of $1.6 billion of the company’s debt, according to a CBL Properties news release.

    It also means that Chattanooga, Tennessee-based CBL (also known as CBL & Associates Properties Inc.) has reached a “truce” with lenders led by Wells Fargo, according to a Wall Street Journal story.

    The revised bankruptcy plan “achieves all of the major objectives we have set for CBL post-emergence, including greater financial flexibility with a significantly deleveraged balance sheet, a lengthened maturity schedule and overall lower interest expense.”

    He added, “With this agreement in hand, we look forward to moving ahead with the court approval and confirmation process and are confident that the restructured company will be in an excellent position to execute on our strategies and return to growth.”

    • otishertz says:

      Pretty sure you can get two day Amazon delivery in most of those places. Amazon is the real culprit here in the collapse of malls. Amazon destroyed small businesses I didn’t think so much more destruction was possible after watching Wal-Mart start the decimation of local retail around 2000.

      There are no locals to inhabit these malls except large corporate BS trophy stores… The likes of spencers, hot topic, and foot locker that appeal to phone drones with their first credit card.

      What amazon dod was sell virtual shelf space at a high commission for them.

      Bezos thanks you for giving him a multi-billion dollar toy spaceship.

      • Zantetsu says:

        amazon.com is very convenient for shopping and I’d rather shop there than at a mall any day of the week. I prefer it even over “local mom and pop” middlemen.

        • Zantetsu says:

          p.s. the only closures that I really lament are Fry’s Electronics, and only because it represented something of silicon valley at one point in time decades ago when geek culture was more exclusive to this area. Now the Bay Area has less geek cred, and we’re run by corporate monoculture.

          But I blame myself because I too shopped more at Amazon and Newegg than Fry’s over the past decade.

        • otishertz says:

          It’s convenient compared to the remaining shopping options. What then, when you only have one or two options.

          Perchance a duopololy? Trioploly? FAAMG?

        • MCH says:

          To be fair, Fry’s merchandize in the last few years of existence wasn’t anything to talk about, you’d have almost better luck shopping at Best Buy.

          As for Amazon, jefe Jeff thanks you for sending him to space. Seriously.

    • Old School says:

      I think debt market is different than equity market as things can get strong out and workouts done for years. Equity market you die pretty quick.

  13. rich says:

    So they bought the Town Center for $192,000. Sold off the Community Center, and now they are getting Wells Fargo and friends to eliminate $1.6 billion of their debt. The ghost of Bernie Madoff must have been their accountant.

    “CBL bought Mayfaire Town Center and Mayfaire Community Center in Wilmington for $192 million in June 2015 before selling off the community center later that same year.

    The amended Restructuring Support Agreement (RSA) provides for the elimination of $1.6 billion of the company’s debt, according to a CBL Properties news release.”

    Sounds like going BK is going to make them a fortune. Money for nothing and the chicks are free.

  14. David Hall says:

    I remember Landmark Mall in Alexandria, VA a few miles south of Washington, D.C. It drew crowds of people looking for clothes, shoes, etc. I remember buying Levi blue jeans at the Gap Store there in the 1970’s. Gap (GPS) stock is below its 2000 high.

    Amazon was considering using Landmark Mall as a fulfillment center.

    • Nick Kelly says:

      I have just been informed that a ‘fulfilment center’ is an Amazon warehouse. I assumed it was either a video game arcade or a brothel.

      • MCH says:

        You know if it was either of the other cases, it would employ more people. But hey, that might be a new line of business for Amazon. There are fulfillment centers, and then there are fulfillment centers.

  15. Auldyin says:

    Smart public auditing W.
    Pity it’s so difficult to follow the trails to see if any of these individual CMBS ever ended up being QE’d by the Fed and at what price. Maybe they don’t buy CMBS, I don’t know and it’s such a jungle to try to read through all the transaction trails.
    DB & RBS co-incidences as usual in the cast list. Suppose it all looked fine when Malls were the ‘in’ thing.

    • Wolf Richter says:

      Auldyin,

      The Fed only bought CMBS whose underlying mortgages were backed by apartment buildings and guaranteed by the government via Fannie Mae, Freddie Mac, and Ginnie Mae. So the Fed didn’t buy any mall, hotel, or office CMBS.

      • rich says:

        “So the Fed didn’t buy any mall, hotel, or office CMBS.”

        The Fed did buy hotel CMBS when it bought the Bear Stearns toxic waste that made up Maiden Lane 1.

        “The assets acquired by the Maiden Lane Grantor Trust include an approximately $4.0 billion interest in a $20 billion mortgage and mezzanine financing provided to Blackstone in 2007 to take Hilton Worldwide~ Inc. (“Hilton”) private. The Hilton financing is highly structured and consists of a single mortgage loan and 11 tranches of mezzanine debt~ each held by multiple pari passu lenders. In total~ the mortgage and mezzanine debt is held by approximately 125 separate interests, which are affiliated with 24 different institutions. The Maiden Lane Grantor Trust is the largest holder of the Hilton financing, having an interest in the mortgage loan and nine of the ten mezzanine tranches. In August 2009, Blackstone submitted a debt restructuring proposal to Maiden Lane and the other Hilton lenders to deleverage Hilton and provide for greater liquidity. ”

        There was also a motel chain, that was held in Maiden Lane, that filed for bankruptcy after the Fed bought Maiden Lane. I can’t remember which one it was.

      • Auldyin says:

        Thanks W
        At least the Fed are a bit choosey!

  16. 635 says:

    The slow death of malls is not exactly an overnight phenomenon. If you have been long this paper 7 years , not so bright ……

  17. MCH says:

    Securitization… well, those pension funds and bond funds shouldn’t complain too much, they had probably a pretty decent set of rates for a while. I wonder if those fund managers will get their management fee clawed back.

    The story sounds strangely familiar, just replace malls with residential housing, and it’s pretty much the same event. The hilarious thing is that if I look at SPG chart over the last year, they are up. And if we consider it over the last five years, they are only down by about 50%.

    I wonder if those funds bought into GME and AMC as a possible hedge.

  18. otishertz says:

    Monogrammed hat stores and abandoned food courts of GMO Sysco poison pretending to be food are not going to pay for Simon Group’s loans. It’s almost laughable that the mall owners did not see the writing on the wall ten years ago.

    A significant portion of the earlier destruction in this space is the result of asset striiping by hedgies and private equity. What happened to the venerable Sears is a national tradgedy. Asset stripped and suffocated by non-retail financiers until it could no longer breathe. They killed Sears. On purpose.

    • MiTurn says:

      “Monogrammed hat stores”

      I might be a loner here, but I thought that was cutting-edge tech in the day! Totally cool.

      Gosh, I’m old…

      • otishertz says:

        I hear clerks at Lids have been authorized to administer an intravenous Phizer treatment with all qualified purchases. That may draw the crowds.

    • RightNYer says:

      I am no fan of Eddie Lampert, but let’s be honest, Sears’ problems began long before his involvement.

      • Harrold says:

        Sears peaked in the late 1960’s when Baby Boomers were coming of age.

        • RightNYer says:

          Yep. Last time I went to a Sears, I was stunned by how disorganized and disjointed everything was. None of the employees knew anything. It was just a jumble of various products in separate parts of the store.

  19. Seneca’s Cliff says:

    Why have to keep all these malls!! Where else are we going to put all the GameStop stores that are obviously coming based on the stock price.

    • Anthony A. says:

      Put them inside the AMC theaters, next to the $8 popcorn stand.

      • Nathan Dumbrowski says:

        All in one shopping. What am I missing? Put in a Tesla “dealership” at the AMC theatre, GME storefront to get your gaming fix and have digital currency kiosk so you can bet on the digital coin while you watch the show

        • Anthony A. says:

          May even have room in the AMC building for an Amazon return kiosk!

          I should have been a real estate consultant instead of an engineer. My spelling would be bttter too.

  20. MonkeyBusiness says:

    At least, someone might still be bullish on the prospects of Downtown SF. Among the many “Available for Rent” properties, I noticed a “new” building just across the street from old Barney’s. Anyone know what that’s supposed to be? Looks pretty sleek. I haven’t been to that area for the longest time, but I think the building is occupying the old Macy’s Men Section.

  21. California Bob says:

    FWIW, the main/only large mall in my medium-sized Central Valley town appears to be thriving. Go figure.

    • DougP says:

      Thriving appearance perhaps due to lots of cars in the parking lots, but that does not tell the real financial story behind the scenes. If the thriving mall is in debt up to its corndogs It just might thrive itself into a urban exploration site.

      • Augustus Frost says:

        The closest mall near me had a lot of cars parked on one side when I took my mother to walk there. I couldn’t figure out where the people were, as there was literally almost no one inside.

        Turns out the parking lot was being used for the Emory University shuttle service.

        • Jus-asc'in says:

          You might not be surprised to find out that Elkhart’s mall parking lot is storing RV motorhome and delivery truck chassis (likely for AMZN) waiting for their turn in a factory.

  22. Gary Yary says:

    Whatever we do as a country we must keep the Canadians from crossing the border – they might have a virus.

    Make no mistake that the Mexican border should have a wall. They might be coming in to apply for a job no ‘merican would do with a eviction and mortgage moratorium as his or her Constitutional Right.

    The real estate companies should be bailed out. When the US goes bankrupt paying for everyone to go bankrupt…maybe Canada or Mexico will still like us?

    I will buy all the distressed Mall’s and create a national sport called Hockeyoccer…a soccer hockey game with donuts and tacos as the reward.

    Apply now…

    • KGC says:

      It’s not the USA maintaining the lockdown on the northern boarder.

      And as for the southern one, I am amazed not one politician has raised the issue of unvaccinated, illegal, refugees increasing the spread of the pandemic into our health care system.

      • Randall Hooker says:

        You misspelled “border”.
        And as an ex-pat in Mexico, the Covid spike this month in Baja Sur is due to Gringos (that would be you) swarming down without vaccinations and infecting the waiters, reception and housekeeping staff, taxi drivers and other tourists. Who take it home to their families.
        Mexico should close their “boarder” to Americans rather than the other way around. I would feel much safer then.

        • TenGallonHat says:

          Any proof, Randy Hooker? Please show the proof to back up your story……

        • Augustus Frost says:

          Please do and don’t ever open it again.

        • Anthony A. says:

          Yeah, get the Mexican government to close that border. Then what will I do for a lawn service? Cut it myself?

    • TenGallonHat says:

      We should invade The North like those below us are doing!!! What ‘ya think ’bout that??? What would the Can’s think ’bout that??? Please don’t go radio-silent on me…..

      • Paulo says:

        Too long of border for us to put up a fence. :-) Believe me, the fence idea gets discussed ‘up here’, especially after the last 4 years.

        Canadian border, or should I use the term boarder :-), open to US fully VACCINATED tourists Aug 9th due to our high vaccination rate. A Vaxx passport by app required, plus tests before arrival at border, etc.

        The US is keeping their side closed. They cite their high infection rates and still climbing, as the reason. Gotta love that freedom thingy.

        I feel sorry for the Pt Roberts population. Talk about being stuck.

        As for the article, a mall would be easy to convert to mini storage solutions, plus RV and boat storage. I’ve seen it done and it has been quite successful after the original mall went under.

        • MCH says:

          You guys really do need a wall. It would keep the riff raff from the south out.

          Should be there post pandemic. ?

      • Anthony A. says:

        Spend time up there this winter. See how cold and frozen everything is. Even the Mexicans don’t want to go to Canada.

  23. Nathan Dumbrowski says:

    Concerned about how this type of slow train wreck is going to hurt pensions and long term investors that never knowingly invested in the mall properties. Seems like these shell companies are spun out to hold the “bag” while the un-informed investor is going to be holding a lot of these companies collectively. Shadow transactions. Sort of like how you see J&J looking at options to perfectly legally spin off a company that can hold the bag for the losses they are about to incur.

    Investors beware below

    • snickers says:

      Yes sir,
      It is a sad commentary who describes the loss of confidence new entrepreneurs find shortly after going all in.
      These are our children who long for more PRODUCTIVE working hours from that employer.
      The hard worker tired of short hours, stagnant pay checks ZERO paid time off, no worthwhile medical for the new family member basically crap from very very hard work.
      Looking forward in the work place change will come very slow.
      Looking forward on the political landscape Workers Rights to a fair and decent future will be godspeed.
      I often ask “in all of history what is the most highest print book in mankind?
      Only a antiquarian bookseller can answer this?
      Jack London
      The Cry of the Wolf

      no link

  24. Snickers says:

    I’m still sitting pat on the sidelines.
    It is tempting to play the latest WF scam although I cant bring myself around to this.
    My thoughts and investments belong to us who are more ethically inclined towards honesty and fairer profits.
    WF is a A-1 classroom study of thieves without a conscience.
    I’ll pass for now.

    • Dan Romig says:

      “… with Wells Fargo as the master servicer.”

      Evidently WF is also into other things I was not aware of until reading this.

      Snickers is an appropriate handle, eh?

      • Wolf Richter says:

        Wells Fargo is the largest CMBS servicer in the US.

        • Dan Romig says:

          Apologies for a failed attempt at double entendre humor.

          I thought the reference to snickers (a half-suppressed, scornful laugh – lexico.com) would be the giveaway. I know, “don’t quit the day job.” But it’s too late, I already did.

  25. snickers says:

    I commented here some year ago about these east coast super mall and its ties to a certain California supermall.
    One year ago wolf followed the ownership to a French offshore global enterprise.
    Then he stopped cold short of naming the creditors at large or the graveyard for the mbs and that certain offshore fereal family (french) invested in this certain mall.
    Just wondering cause I have time on my hands.
    The certain California mall? The east coast mall bankruptcy?
    Anyone following these thieves?

    • stan65 says:

      I was wondering about Simon’s european connection.

      One mall fleeced DB.

      The other one did the RBS in.

      Both banks propped by their respective governments.

  26. JK says:

    Not really into malls. Prefer small businesses, but it is sad to see this taking place.

    Some malls are in bad areas and I won’t shop in those if you pay me a hundred bucks. Forget it. Walking in a dump and dealing with dumpy people (not the workers, the customers) is not worth my time nor my health.

  27. otishertz says:

    Can I get a round of applause for Wolf’s moderation? Usually, when a comment of mine is expunged I’m grateful. I know some may think I’m joking but I’m serious.

    Most of my comments that didn’t pass muster and were deleted were things that could have possibly identified me as a dissenter or which I’d rather not repeated.

    The internet never forgets and I’m grateful for Wolf removing any contentious or controversial subjects I introduce. I just hope he got a laugh before deleting them. I don’t take it personally.

    Keep up the good work!

    • Wolf Richter says:

      otishertz,

      I thought it was obvious that you were being funny. If I get people taking it as serious info, I’m going to delete it or something :-]

      • otishertz says:

        Was tongue in cheek. No offense. Delete my comments if you think they will detract from the curated comments that I come heare to read. I can get off subject sometimes. OK. often.

        • kitten lopez says:

          Otishertz,
          you’re hilarious please never change, pleeeease. i still think of Count Dracula doing Michael Engel’s lists.

          “Usually, when a comment of mine is expunged I’m grateful. I know some may think I’m joking but I’m serious….Most of my comments that didn’t pass muster and were deleted were things that could have possibly identified me as a dissenter or which I’d rather not repeated.”

          i agree. i’ve become rather attached to him for it, and love that Wolf elegantly keeps some of us ones looking presentable to company–with the back of our skirts not stuck in our pantyhose or toilet paper trailing in our shoe, so’s we don’t embarrass ourselves… too, too much.

          he may be a cross between James Bond and Bartleby, but he can only do so much to help us. the egg yolk on our chin we can say is part of our “charm.”

          x

        • Paulo says:

          Me too ……what Otis and Kitten said.

          Sometimes I get choked and do a reply when I just should have shut down the computer. Wolf occasionally fixes it for me. :-)

          This moderated site is the only decent one around from what I can see. He keeps it from being hijacked.

  28. Trucker guy says:

    I was in one of spokane’s malls on a Saturday morning last week working and it was the first time I’d been in a mall in probably a decade. Nothing’s changed about them other than the fact maybe 20 people were milling about in the whole place. Mostly at the restaurants. Parking lot was nearly full but the shops were empty, the walking area was empty. I was expecting a crowd.

  29. doug says:

    Here our little NC burg, the owner of a former rug factory 650,000 sq ft just applied to be rezoned as retail. I kid you not. Sounds desperate.

    • Beardawg says:

      That seems bizarre when retail is dead ? They should sell to Amazon as a distribution warehouse.

      • doug says:

        Or hold out for legalization and become a grow op?
        The place was purchased for 1.75 mil out of bankruptcy when the rug plant closed, er, moved to mexico.(thanks Nafta).

        • Nathan Dumbrowski says:

          why thank Nafta. Thank for the buyer and the management that chased the all mighty US Dollar. They want cheaper labor and will got it by relocating operations. Retail is still alive by my trips to the local strip malls, driving to outlet centers they are packed and large metros like Atlanta are filled up to the brim. People are shopping but not in traditional malls IMO. See mall parking lots empty but strip malls full

        • MCH says:

          Problem with giant weed factories are as follows:

          A. The smell
          B. The need for security… lots of it.
          C. The smell…. I did mention that, right?

          It’s really funny actually, the security is there because they are still unbanked and have lots of cash on hand.

  30. JMG says:

    Here’s a walkthrough of the mall in question in case anyone wants to take a look at it. There’s a whole youtube niche of dead mall documentarians who visit places like this.

    • JMG says:

      Youtube link removed? Is that an auto moderator or what? It’s not like it’s an irrelevant link, bit silly to delete it imo. My comment without the link makes no sense.

      • Wolf Richter says:

        JMG,

        Most links get removed. ALL YouTube links get removed.

        YouTube belongs to Google, and I’m not promoting Google more than I HAVE to. Also, I have to check out every link that gets published here, and that takes too long; and with many links, it’s way too risky: people post links leading to malware all the time. Click on it, and you have it on your computer. My site’s standing on the internet would be compromised. And with YouTube, a lot of times, I would have to sit through an ad before even seeing the video, and so no way.

        • JMG says:

          Ok I guess that’s fair enough. Can’t disagree with anything you said there.

          Thanks Wolf.

  31. Russell says:

    We all need to re-watch, “Other People’s Money”. DeVito, as usual, portrays the likeable villain that preys on failing business, consolidating them and keeping the finances flowing.

    He famously stated, “I don’t make anything? I’m making you money. And lest we forget, that’s the only reason any of you became stockholders in the first place. You want to make money! You don’t care if they manufacture wire and cable, fried chicken, or grow tangerines! You want to make money! I’m the only friend you’ve got. I’m making you money. Take the money.”

    Malls are just the latest shoe to fall.

    • Auldyin says:

      R
      Great movie
      Got it on VCR tape somewhere, I’ll watch it as I dvd it this weekend.
      Cheers.

  32. CHRISTOPHER says:

    The interesting part here to me is that the creditors got a judgement for over $100M against SPG.

    I thought CMBS was non-recourse debt? That is why Simon got so aggressive with their “jingle mall” strategy … this appears to be a glitch in the matrix.

    Good luck getting that judgement enforced, I suspect. Maybe the creditors can garnish David Simon’s salary or hit his bank account. That would probably get them their money back real fast.

    • Wolf Richter says:

      That judgement allows the creditors to foreclose and sell the property and keep the proceeds up to the amount of the judgement. That’s all it does.

      This is not a “judgement for deficiency,” as you would get in a court when suing over a recourse loan after the collateral was sold at less than the amount of the loan, interest, and fees.

      • CHRISTOPHER says:

        Thanks! So David Simon can sleep well at night … why am I not surprised?

  33. Bruce Turton says:

    “And the walls come a-tumblin’ down”!!

  34. Bobber says:

    Wolf, maybe you and Kitten should design some T-shirts for sale.

    How about one with a criminal mugshot of Jerome Powell with the label “Money Printer”.

    Or, one that says “Stop the price increases !”, with a WTF chart pointing up to a wazoo. I’m sure Kitten could help define what a wazoo looks like.

  35. IndianaCones says:

    Seems to be very little compassion for Simon Property Group. It’s not like they sued Abercrombie for covid rent even though Simon changed the locks on A&F stores so they couldn’t get out inventory to fulfill online orders. Or that they file lawsuits against out of state mall tenants in Indiana. But not in any court, one specific court, with a specific judge. Don’t worry. It’s not like she is biased. I mean sure, she ruled that she had jurisdiction over a defamation lawsuit by Herbert & Bui Simon against the attorney representing one of their house staff in their LA residence that was suing them. And sure she ruled against Starbucks/Teavana for SPG and quoted in NY Post saying that there’s no precedent for her ruling. So it’s not like Simon is gaming the system to their advantage here… smh Oh and SPG entities in Panama Papers leaks.

  36. Turtle says:

    One mall in my area is down to just Dillard’s Clearance Center and JCPenny after Sears tanked. Macy’s was converted into Right Move Storage!

    Less than five miles away, a new upscale mall with Tiffany’s and Louis Vuitton seems to be doing just fine.

    It’s like a tale of two cities. The bottom 50% and the top 10%. Neiman Marcus bailed on the first mall to anchor the second.

  37. gametv says:

    The whole financial structure of our economy and business environment is set up to favor the financial class – wheeling and dealing with borrowed money that is virtually free.

    Raise interest rates and and you really quickly find out who is generating sufficient return due to the value they create, and who is merely gambling with other people’s money.

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