Shop 'till you drop or 'till the loan secured by the Macerich-owned Queens Mall gets defeased

Bondholders in CMBS with exposure to Macerich Company would be wise to watch how Simon Property Group’s $22.4-billion bid for the mall operator unfolds.

There are presently 17 loans secured by Macerich properties packaged into 18 commercial mortgage-backed securities, according to data from Nomura, Trepp and the SEC (see below). Their total balance is $3.5 billion.

Simon announced the bid on March 9, adding that it had agreed to sell certain Macerich assets to General Growth Properties (GGP) should the deal go through.

Divested properties could include those pooled into CMBS. 

“If that happens, you’re going to have some of these loans pre-paying, and if the malls don’t sell well they could take a loss,” said Joe McBride, a research analyst at real estate data firm Trepp. “Basically if you’re a bondholder in any of these deals you’d be keeping an eye on prepayment or [potential] losses.”

What they would get rid of isn’t yet clear.

In a research note put out the day of the proposed bid, Nomura analysts said that Macerich’s portfolio appeared to be “a very good fit” for both Simon and GGP, with a shared focus on Class A regional malls. Based in Santa Monica, California, Macerich does, however, have more of a Western presence than the other two, with Arizona and Southern California among its top markets.

Two looming maturities in Macerich-related CMBS are loans to Lakewood Center (COMM 2005-C5) and Flagstaff Mall (BACM 2005-6). Nomura said Lakewood has reported “strong financial and tenant sales,” while Flagstaff is struggling, which raises the specter of default. Another locus of concern: the Valley Mall loan (BACM 2006-2), with weak tenant sales and a maturity slated for June 2016.

The Nomura analysts said that all three firms report similar tenant sales of $619 per square foot at Simon, $587psf at Macerich and $570psf at GGP at the end of 2014. Occupancy costs are 11.7% for Simon, lower than the 13.4% posted by the other two.

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