10/01/2010

Morgan Stanley Lands 2 Big Mall Mortgages

Morgan Stanley's revived commercial MBS operation has won a roughly $175 million mortgage on a mall in Hawaii, its second big retail assignment in the past few weeks.

A partnership between fund shop Blackstone and Glimcher Realty will use the five-year, fixed-rate loan to finance its $245 million acquisition of the 1 million-square-foot Pearlridge Center in Honolulu from Northwestern Mutual Life. The loan-to-value ratio is about 71%.

Meanwhile, Morgan Stanley, as expected, also landed a $235 million fixed-rate mortgage on Christiana Mall in Newark, Del. The bank was viewed as having the inside track a few weeks ago. The 1.1 million-sf mall, about 10 miles south of Wilmington, is owned by a joint venture between General Growth Properties of Chicago and Prime Property Fund, which is operated by Morgan Stanley.

The assignments are the first big loans originated by Morgan Stanley since it restarted its CMBS shop in the spring. The bank was the dominant bookrunner of CMBS transactions through much of the 2000s, as well as a leading originator of securitized loans. But like everyone else, it disbanded its real estate origination group after the market crashed.

Morgan Stanley is expected to pool the two mall loans with other mortgages in a large CMBS offering, perhaps by yearend. The bank is also expected to bring other lenders into the deal to increase its size.

The Blackstone team's advisor, Eastdil Secured, shopped the loan on the Hawaii mall to foreign lenders, domestic banks, life companies and securitization programs. CMBS shops evidently had an edge because they could commit to closing the loan within the timeframe of the mall purchase. Life companies, which normally compete aggressively for this asset type, likely would have had to join forces to take down a loan of this size in a relatively small market, resulting in negotiations that might have slowed down the process. Morgan Stanley's loan is expected to close within two months.

Blackstone will own an 80% stake in the partnership, with Glimcher holding the remaining interest and managing the mall.

Pearlridge Center is Hawaii's second-largest mall. The first portion, built in 1972, is known as Pearlridge Uptown. The second section, Pearlridge Downtown, opened four years later. In between the portions is Sumida Farm, the largest supplier of watercress in Hawaii.

Anchors include Macy's, Inspiration Furniture, Sears and the state's lone Toys R Us. The property features a monorail that runs between the two sections.

New York-based Blackstone formed a partnership with Glimcher in March to target mall investments. Glimcher, based in Columbus, Ohio, owns 26 malls and shopping centers in 13 states.

The Christiana Mall mortgage is equal to slightly less than 60% of the property's value. The mall was built in 1978 and renovated in 1990. The anchors are Barnes & Noble, JC Penney, Macy's, Target and Nordstrom. The General Growth partnership will use the proceeds to retire a $115 million mortgage from Prudential Mortgage.

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