Shopping malls like Lincolnwood Town Center suffered greatly during the coronavirus pandemic, only compounding the problems they were already facing as online shopping gnawed at the brick retail market and of mortar.
With many stores closed at the start of the pandemic, shoppers have moved even more online shopping. Some traders have simply stopped paying their rent. What was a slow decline in the industry quickly turned into a crisis for many homeowners. Large local properties like Gurnee Mills, Yorktown Center, the South Barrington Arboretum and the North Riverside Park Mall all have faced debt problems to varying degrees over the past year.
Washington Prime, a real estate investment trust, was able to negotiate a so-called forbearance deal last year on the mortgage on Lincolnwood Town Center, a mall on the corner of Touhy Avenue and McCormick Boulevard. Under a forbearance agreement, lenders agree not to take legal action, such as filing a foreclosure action, against a homeowner who is in default on a loan, and l The borrower often accepts some sort of payment plan in return.
The pact allowed Washington Prime to suspend monthly mortgage payments on Lincolnwood Town Center from May through October of last year, according to titles records. Payments resumed in November, but Washington Prime defaulted on debt when it missed its January payment, according to its 2020 annual report.
Downtown Lincolnwood suffered a big setback in 2018 when Carson’s, its largest tenant, closed its department store there. Property rebounded in 2019 when furniture retailer RoomPlace leased the space from Carson. But the mall is only 77.3% occupied now, according to the annual report, and it was not generating enough cash flow to cover its debt payments even in 2019, before the pandemic.
It is not known what comes next for the property. His mortgage matures on April 1, but that’s just one of the many issues facing Washington Prime, which confirmed yesterday that it can try to restructure its debt under Chapter 11 bankruptcy protection. The REIT, which was split in 2014 by Indianapolis-based Simon Property Group, owns about 100 shopping centers across the country, including properties in Waukegan, Orland Park and Countryside.
Washington Prime could include Lincolnwood Town Center as part of a larger restructuring, or it could simply decide to cede the property, avoiding a foreclosure battle. It is also possible, but unlikely, that the REIT will refinance the mall with a new loan. The value of shopping malls has fallen so much and lenders are so wary of the industry that it has become extremely difficult to refinance properties.
It’s certainly much more difficult than in 2014, when the newly independent Washington Prime took out the loan on Lincolnwood Town Center. The debt was then bundled with other loans and sold to bond investors as part of a commercial mortgage-backed securities offering. At the time, the mall was valued at $ 89.1 million.
A special agent, or a company hired to oversee troubled CMBS loans, is now in charge of the Lincolnwood Mall mortgage.
The Washington Prime company which owns the property “has entered into discussions with the special non-recourse loan department and is considering various options,” Washington Prime said in its annual report.
A Washington Prime executive declined to comment. A representative from the special service, New York-based Torchlight Investors, did not return a call.
The shopping center industry was flourishing when Lincolnwood Town Center celebrated its grand opening in 1990. The festivities included “Wheel of Fortune” star Vanna White, who signed autographs.
But the mall’s fortunes have waned in recent years. Its revenue fell to $ 8.7 million in 2019, down 29% from 2016, according to Bloomberg data. Its net operating income fell 40% over the same period to $ 3.3 million. Data for 2020 are not yet available.