* New York mall defaults on $124 million payment
* Two large stores are liquidated
* Shares rise 12.25 percent
By Ilaina Jonas
NEW YORK, March 31 A Long Island mall partly owned
and managed by Simon Property Group (SPG.N) has defaulted on a
$124 million balloon mortgage payment after two of the main stores
there filed for bankruptcy.
The Mall at the Source in Westbury, New York, defaulted on the
payment of the principal on March 11, said a spokesman for Simon,
the largest U.S. mall owner and operator.
Simon holds a 25 percent stake in the mall, and would not
disclose its partners.
"Right now there's a shortage of refinancing dollars in the
market place and yes, they're not going to be alone," said Thomas
Fink, senior vice president of Trepp, which tracks the commercial
real estate loans. The loan for the Mall at the Source had been
securitized as bonds in a commercial mortgage-backed securities
"They're not necessarily going to be forced to surrender the
property," he said. "They may negotiate some type of a workout,
possibly with the trust."
The default may lead to compare Simon with No. 2 U.S. mall
owner General Growth Properties Inc (GGP.N), which has said it may
file for bankruptcy protection due to its inability to refinance
its maturing debt. However, allowing the debt to default may just
make business sense for Simon and its partners, Fink said.
"We have seen other operators who were recognized as being
astute give up properties that they no longer found value in and
just walk away from," he said.
On Tuesday, Simon completed a seven-year 7.75 percent $100
million mortgage on Penn Square Mall in Oklahoma City, Oklahoma.
The interest rate on the previous $65.8 million mortgage was 7.03
On March 20, it completed a 10-year $97.5 million mortgage for
Woodland Hills Mall in Tulsa, Oklahoma. The interest rate was 7.79
percent and replaced a previous 7 percent $78.6 million loan.
Earlier this month, Simon raised $1.2 billion in a debt and
Shares of Simon rose 12.25 percent, or $3.78 to close at
$34.64 Tuesday on the New York Stock Exchange.
The 521,486 square-foot mall in Westbury has been leaking
tenants. Circuit City Stores Inc CCTYQ.PK, which went out of
business earlier this year, was one of its biggest tenants. At
208,000 square feet, jeweler and home goods store Fortunoff is the
largest store in the mall. The company owns its building, and is
is in the process of going out of business. No final date of
operation has yet been set.
Department store Steve & Barry's used to be a tenant before it
Current tenants include Ayhan's Shish Kebab, Dave & Busters,
The Cheesecake Factory Inc (CAKE.O), Famous Footwear, Foot Locker
Inc (FL.N), Gap (GPS.N), Gap Kids, H&M (HMb.ST), Nordstrom Rack
(JWN.N), Off 5th-Saks Fifth Avenue Outlet, Old Navy and P.F.
Chang's China Bistro Inc PFCB.O.
Executives from Simon did not return calls seeking comment.
(Editing by Phil Berlowitz)