Wednesday, April 22, 2009

Simon Preparing Jingle Mail?

Sounds like Simon might be preparing to turn in the keys on Palm Beach Mall. This is the 3rd largest loan, 5.8%, in JPMCC 2003-PM1A.

The property performance declined drastically last year (Madoff?) to just 0.63x DSCR for YE 2008 from 2007 DSCR of 1.32x. Simon has been covering the shortfall out of pocket, but apparently stopped doing so, according to Kris Hudson at the WSJ (sorry no link, but pasted below).

No special servicer notes were readily available. You'll recall that Eastland Mall (formerly Glimcher's) went through a similar process, but it dragged out for years and the saga continues today.

Pain in Palm Beach

Even the biggest landlords face losing properties to foreclosure in this recession. Take mall owner Simon Property Group Inc., which is poised to forfeit the 42-year-old Palm Beach Mall after the servicer on the mall's $51 million securitized mortgage initiated foreclosure proceedings last week.

Simon inherited the mall in West Palm Beach, Fla., when it bought two rival mall owners in 1996 and 1998. Even then, Palm Beach Mall was losing out to newer, ritzier malls in neighboring cities. Simon renovated it this decade, but it continued to decline and now is mostly empty. An effort to lure home-goods retailer Ikea was scuttled by the recession.

In recent years, all of the cash flow generated by Palm Beach Mall went to paying the interest on its mortgage. But it fell short in the past year, and Simon opted against chipping in extra money to cover the difference in March and this month.

Efforts to renegotiate the loan failed, according to a person familiar with the talks. A representative of the mortgage's servicer, Orix Capital Markets LLC, declined to comment, as did a Simon representative.

—Kris Hudson

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