This is only the tip of the iceberg of defaulting commercial debt. With consumers hunkering down for some time to come, chain stores and stand alone retail outlets are closing at an alarming rate. Soon you will start to hear the term "ghost malls".-Lou
Mall partly owned by Simon Property defaults on payment
NEW YORK, March 31 (Reuters) - 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 (CMBS) trust.
"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.
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