Macerich has an episode of déjà vu, after a $300 million loan on its Santa Monica Place mall goes to special servicing — the second time in two years.
The loan on the 527,000-square-foot mall is expected to see “imminent maturity default,” according to Trepp.
In August 2022, the same loan was sent to special servicing for the same reason. But Macerich managed to negotiate an extension with lender Wells Fargo, by buying a rate cap, a hedge against rising rates. With that new extension, the loan is currently set to expire in December.
Macerich did not respond to a request for comment.
The property at 395 Santa Monica Place has struggled for the last five years. As tenants have given up space and in the wake of the pandemic, Macerich, a real estate investment trust headquartered in Santa Monica, has struggled to fill the vacancies.
At the end of 2019, the property was 95 percent leased, including to higher-end department stores Bloomingdale’s and Nordstrom, according to financial filings.
Macerich was reeling in an average of $58 per square foot a year on its owned malls, it disclosed in a 2019 financial report. Based on that average, Santa Monica Place would have generated about $1.4 million a month in rent — almost double what was needed to service the debt.
But in 2020, after the pandemic hit, occupancy dropped to 91 percent. In 2021, Bloomingdale’s and ArcLight Cinemas both vacated the property, causing occupancy to shrink to 85 percent.
More than half of the property was available for lease at the beginning of 2023, according to Macerich.
At the end of 2023, the property was reeling in about 70 percent of what was needed to service the debt.
Macerich expects that a renovation of the spaces left by Bloomingdale’s and ArcLight will help attract new tenants, according to a 2023 annual report. The firm plans to spend up to $40 million to redevelop the 150,000-square-foot space, a project it anticipates will finish by next year.