* Mall owners to default on $141 mln loan
* Simon Property Group owns 25 pct of mall
* Simon shares close up 1.4 pct
NEW YORK, May 12 A $141.1 million loan on a
Maryland mall, 25 percent owned by Simon Property Group Inc
(SPG.N), has been put into special servicing because its owners
are about to default, Fitch Ratings said.
The loan on the 1.1 million square-foot Lakeforest Mall in
Gaithersburg, Maryland, near Washington D.C. was sliced into
two and securitized into commercial mortgage-backed securities
(CMBS) bonds in 2005, according to Fitch.
The mall is anchored by Sears, Macy's, JC Penny and Lord &
Taylor. But the downturn in the economy and weak spending by
U.S. consumers helped drive down occupancy to 63 percent from
89 percent in 2005, Fitch said.
A special servicer steps in when a CMBS loan is in trouble.
Only the special servicer has the power to modify a CMBS loan,
sell it or liquidate the property to recoup the maximum amount
for bondholders. A CMBS loan cannot be modified until it is
transferred into special serving.
A spokesman for Simon, the largest U.S. mall owner,
declined to comment.
Simon inherited the mall in 2007 when it bought the Mills
Corp. Mills owned the mall in partnership with General Motors
Transferring a loan into special servicing or even handing
back the keys to the lender sometimes makes the most business
sense, especially when the value of the property has fallen
below the loan balance, Stifel Nicolaus analyst Nathan Isbee
Simon did that last year when it allowed a loan on a mall
in Westbury New York to default so it could broker a
refinancing deal after the major tenant, Fortunoff, filed for
bankruptcy. Simon owns 25.5 percent of that mall, according to
a company filing.
Simon defaulted on a loan on a mall in Palm Beach Florida
after furniture retailer IKEA [IKEA.UL] backed out of a deal to
take a significant portion of a redevelopment there. Simon is a
100 percent owner of that mall, according to a company filing.
Simon stock rose 1.4 percent, or $1.29, to close at $91.31
a share on the New York Stock Exchange.
(Reporting by Ilaina Jonas; editing by Andre Grenon)