14/07/2024 2:27 PM

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Piece of That Fashion

Gurnee Mills, Yorktown Center malls buy more time with lenders

The agreement, reached Dec. 31, could give Simon, the country’s biggest shopping mall owner, more time to turn around Gurnee Mills, the area’s third-biggest mall, with about 1.9 million square feet. Bloomberg did not provide terms of the deal. Under a forbearance agreement, lenders agree not to take legal action, like filing a foreclosure suit, against a property owner that has defaulted on a loan, and the borrower often agrees to some kind of payment plan in return.

In west suburban Lombard, the owner of Yorktown Center has worked out an extension to pay off about $107 million in mortgage debt on the 1.4 million-square-foot mall, according to Bloomberg data.

The mortgage initially matured in March 2019, but the property owner, a joint venture including New York-based private-equity firm KKR, reached an agreement with a loan servicer to extend the due date a year, to March 2020. Then the pandemic hit, sending many retail landlords into a tailspin as they tried to collect rent from struggling tenants and making it even harder for KKR to pay off the debt.

Yorktown Center is 90 percent occupied, but “collections have been severely impacted with several tenant bankruptcies and potential (co-tenancy) risk,” according to Bloomberg. Under co-tenancy clauses in many leases, retail tenants can move out if certain other stores close.

It’s unclear when the Yorktown Center loan matures now. A KKR spokesman declined to comment.

A representative of Simon, the owner of Gurnee Mills, did not respond to a request for comment.

Both malls carry securitized debt, mortgages that were pooled with other real estate loans and resold as bonds, or commercial mortgage-backed securities (CMBS). Delinquencies on CMBS loans secured by shopping malls and other retail properties soared last year as COVID-19 spread but have fallen in recent months as the market has stabilized.

As vaccinations pick up in the coming months, the economy is on track for a recovery this year. But with more people shopping online—a trend accelerated by the pandemic—retail landlords face an especially uncertain future that could include more store closings and retail bankruptcies. The question for Gurnee Mills and Yorktown Center is whether their recent loan agreements will help solve their problems or merely delay a reckoning.