Simon Property Group and other investors have reportedly completed the transfer of the Crystal Mall to lenders, rather than repaying $81million owed on a commercial mortgage secured by the Waterford Mall.
CoStar reported last week that a commercial mortgage-backed title for the Crystal Mall is now under the supervision of a “special services” company called Rialto Capital, which is co-owned by Greenwich-based Stone Point Capital. In a report released last week, Fitch Ratings identified the original stock as having been issued by the UBS-Barclays Commercial Mortgage Trust pooling investments from a range of clients.
The City of Waterford last valued the mall at just under $60 million, about $8 million less than the replacement cost of the structure, not including the department store anchors and stand-alone restaurants. But Trepp reported last year that the mall’s value plunged 88% to less than $19 million, one of the five steepest declines nationally for commercial properties.
In his annual report earlier this year, Simon revealed that his Crystal Mall loan carried an interest rate of 4.46%, bringing his annual debt service to $4.7 million. By September, Simon was recording more than $1.3 billion in cash and liquid assets in the company’s ledger.
Simon is the largest mall operator in the United States; in Connecticut, one mall remains in the Clinton Premium Outlets on Interstate 95 east of New Haven.
In 2015, the Crystal Mall got a new regional competition east of the Connecticut River at Foxwoods Tanger Outlets, less than a 30-minute drive from Foxwoods Resort Casino. And many shoppers have turned to outdoor malls like the Waterford Commons across from the Crystal Mall, though Connecticut malls have continued to expand their offerings to compete with entertainment venues, restaurants and events.
On Tuesday, the CEO of Simon Property Group referred to a “negative mall narrative” that continues to plague the industry, without mentioning the Crystal Mall loan.
“A lot of people have tried to kill physical retail real estate and particularly closed malls,” CEO David Simon said on a conference call. “I don’t need to remind you when physical retail was shut down in COVID with all the naysayers saying physical retail was gone forever. However, brick and mortar is strong. The brick-and-mortar retailer is strong and e-commerce is stable.”
Simon had previously entrusted the day-to-day management and rental of the Crystal Mall to Spinoso Real Estate Group, which actively promotes the mall’s stores and events on social media.
JCPenney is the only remaining flagship store at the Crystal Mall, along with Buffalo Wild Wings and LongHorn Steakhouse having great restaurants there. Macy’s closed its department store there in 2020, at the end of the first holiday shopping season of the COVID-19 pandemic.
However, vacancies had already piled up at the Crystal Mall, with Sears closing two years before Macy’s. And Bed Bath & Beyond announced last month that it would close its store there, as well as one in Stamford at the Ridgeway Shopping Center. Fitch Ratings said the mall’s occupancy rate was 41% in July, well below the 94.5% mark reported by Simon in its retail portfolio in September.
On Tuesday, Simon reported third-quarter profit of $174 million, up $9.2 million from a year earlier or 5%.
Opened in 1984, the Crystal Mall has just over 780,000 square feet of space over two levels, making it one of the 10 largest malls in Connecticut. The mall property totals approximately 30 acres on the Hartford Turnpike near the junction of Interstate 95 and I-395, making it a possible candidate for redevelopment.
In Trumbull, apartments are now being built next to the Westfield Trumbull, whose Australia-based owner has signaled plans to sell its US malls, but with no reported deal for Westfield Trumbull.
Malls continue to attract investor interest in Connecticut, including the Brass Mill Center in Waterbury and an adjacent mall that sold last spring for $45 million. And the Danbury Fair owner took out a new loan on the property this year, while lining up Target to take over its vacant Sears storefront.
Includes earlier reports from Paul Schott, Luther Turmelle and Rob Ryser who contributed to this report.
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