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CMA
February 17, 2017  

Simon Seeking to Refinance Giant Calif. Mall

A Simon Property partnership is asking lenders to bid on a $585 million mortgage for one of the largest malls in the U.S.

The team is seeking to refinance the 2.3 million-square-foot Del Amo Fashion Center, in Torrance, Calif. The request is for a fixed-rate loan with a term of about 7-10 years. Simon appears to be pitching the assignment to lenders without the aid of a broker.

The early word is that balance-sheet lenders will probably take a run at the loan, but it could also be a good fit for commercial MBS platforms, which might opt to securitize the debt via a single-asset offering.

Simon, an Indianapolis REIT, holds a 50% interest in the upscale, regional mall. Its partners are Farallon Capital of San Francisco and J.P. Morgan Fleming.

The existing debt on the property was originated by a group of banks in 2013 and modified in 2015, when the balance was increased from $310 million to $510 million. There were also some changes in the lineup of lenders in the syndicate. Bank of America is the lead lender and administrative agent for the current mortgage, and the other participants are known to include Fifth Third Bank, Landesbank Baden-Wurttemberg, MUFG, PNC and U.S. Bank. The loan is set to mature next January, although there are two single-year extension options.

The Simon team has been redeveloping the property in phases over the past few years, and the enlarged loan included a $60 million component for construction costs. The ongoing work has involved adding a Nordstrom department store, which opened in late 2015, and another 400,000 sf of retail space while demolishing some older space. Other stores are set to open this year as new space comes online.

Occupancy overall has increased in recent years. The in-line space was 80.1% leased at the end of 2013. A source familiar with the loan request said that space is now about 95% occupied, and generates annual sales in the range of $600/sf. In addition to Nordstrom, the mall’s anchors are Burlington Coat Factory, JC Penney, Macy’s, Marshalls and Sears.

The current ownership structure resulted from a series of transactions that began in 2004 when Mills Corp., which had owned the mall outright, sold a 50% stake to J.P. Morgan Fleming. In 2007, Mills, a mall REIT based in Alexandria, Va., was acquired by Farallon and Simon in a $7.9 billion deal. Simon increased its stake in Del Amo Fashion Center in 2012, apparently by buying part of J.P. Morgan’s interest.

The mall is one of the five largest in the U.S. On the West Coast, it is second only to the 2.8 million-sf South Coast Plaza, about 30 miles to the southeast in Costa Mesa, Calif.