The Fashion Outlets of Niagara Falls USA has defaulted on its loan, which is now being sent to a special servicer.
The mall’s owner, California-based Macerich Co., was required to make a full $86.17 million balloon payment Oct. 6, which it missed.
Macerich had been marketing the mall for sale, likely in an attempt to avoid paying or refinancing the loan balance.
A special servicer is a third party that handles payments and communication between a lender and a company that has defaulted on its loan.
Trepp LLC, a commercial real estate research firm, had put the loan on its watchlist as the loan’s maturity date approached. The commercial-backed securities loan was the only one left in the original bundle of loans that was sold on Wall Street in 2010. The original amount of the loan was $122.5 million and had an interest rate of 5.9%.
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Macerich Co., a real estate investment trust, has owned the 525,663-square-foot Fashion Outlets USA mall since 2010.
The 10-year loan was previously given a three-year extension in December 2020, during the Covid-19 pandemic, when many commercial borrowers were struggling to make payments or refinance their debts. Macerich said at the time that it would be unable to make the $103.6 million balloon payment that was due October 2020.
The extension was secured by a pledge of 181,447 square feet of expansion space connected to the main building at the mall as additional collateral, bringing the property’s total size to more than 707,110 square feet, according to Trepp. That portion of the mall was anchored by Saks Off Fifth, Forever 21 and H&M.
Built in 1982 and renovated in 2008, Fashion Outlets is located at 1900 Military Road in the Town of Niagara, and includes Saks Off Fifth, Marshalls, Nike Factory Store, Old Navy, Gap and Polo Ralph Lauren.
Macerich bought the property from AWE Talisman Co. for $200 million, and borrowed $122.4 million in 2010 from German American Capital Corp., which packaged the loan for sale in pieces to investors.
The mall depends on Canadian shoppers, who were cut off from border crossings during the pandemic and still haven’t returned in full numbers.
The property is still appraised at $180 million, but occupancy has fallen from 93% in 2010 to 79% at the end of last year. Revenues are also down from $17.7 million in 2010 to $15.4 million, while net operating income is down from $11.5 million to $11 million.
Fashion Outlets of Niagara Falls did not respond to a request for comment.