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Retailers aren’t the only ones struggling to pay the bills.
The biggest shopping center in the country, The Mall of America, has missed two months of payments on its $1.4 billion mortgage, a sign of just how much retail real estate owners are reeling during the coronavirus pandemic.
The mall, operated by private developers Triple Five Group, skipped mortgage payments in April and May, according to Trepp, a New York-based research firm that tracks the commercial mortgage-backed securities, or CMBS, market.
A spokesperson for Triple Five Group did not immediately respond to CNBC’s request for comment.
Mall of America closed its doors because of the Covid-19 crisis on March 17. It has now notified notified Wells Fargo, the master servicer that is overseeing its mortgage, of the “hardships” it faces. But it is not clear if Triple Five Group will seek forbearance on its loan.
Mall of America, located in Bloomington, Minnesota, is planning to reopen its retail stores on June 1, according to its website.
“Next to hotel owners, retailers have been the hardest hit by the Covid-19 crisis,” Manus Clancy, Trepp senior managing director, told CNBC. “The percentage of delinquent retail loans has already surpassed the highest percentage reached during the financial crisis and could be headed higher.”
Mall of America- and American Dream-owner Triple Five Group had previously told CNBC that it was concerned about some of its tenants not paying rent, which was going to hinder its ability to make mortgage payments.
American Dream co-CEO Don Ghermezian told CNBC in an interview in early April: “The difficulty we are going though now … if tenants don’t want to pay rent, my response is: ‘I have got to pay a mortgage. I borrowed money. I have got to pay back my lenders.'”
If there is not more assistance to come from the federal government on this front, “many malls will be headed into default because they won’t be able to make mortgage payments going forward,” he said at the time.
Mall of America is not alone in this scenario, either. A number of malls are missing mortgage payments, and particularly those in the CMBS market.
As of the start of this week, Trepp said the percentage of CMBS loans categorized as 30 or more days delinquent for the retail sector was 10%. And those loans in a grace period, meaning a payment could still potentially be made, was 13.6%, Trepp said.
“We’re starting to see forbearances coming in,” Clancy said.
The FT first reported on the Mall of America delinquency.