The retail apocalypse may not be over yet.
A $260 million commercial mortgage-backed securities (CMBS) loan backed by Pembroke Lakes Mall, a 1.1 million-square-foot regional mall outside of Miami, has been sent to special servicing after a maturity default. Morningstar Credit first reported the news.
SEE ALSO: Nuveen Green Capital’s Jessica Bailey, Alexandra Cooley Pioneer C-PACE Movement
The CMBS loan — GSMS 2013-PEMB — is a single-asset, single-borrower transaction held by Brookfield Property Partners that reached maturity on March 1, 2025.
The CMBS loan was previously downgraded in October 2023 by KBRA, a CRE ratings agency. At the time, KBRA noted that the downgrade was sparked by the asset’s “continued decline in operating performance since issuance,” stemming from a high loan-to-value ratio and larger macroeconomic challenges facing mid-tier regional malls. KBRA issued an additional note in October 2024, downgrading all ratings for the CMBS loan, citing “challenges the borrower will face in obtaining a refinancing” without the injection of more equity.
Located at 11401 Pines Boulevard in Pembroke Pines, Fla. — a Broward County city of about 171,000 residents roughly 18 miles southwest of Fort Lauderdale and 22 miles north of Downtown Miami — Pembroke Lakes Mall opened in 1992 and was renovated in 2006. The single-story mall includes several anchor tenants: JCPenney, Dillard’s, Macy’s, AMC Theatres and Round One Entertainment.
The Morningstar Credit report from this month notes that even though the mall’s occupancy stood at 95 percent in September 2024, and every anchor tenant continues to operate, the net cash flow is still 28 percent below the underwritten amount and revenues have decreased in recent years.
A June 2023 report from S&P Global found that net cash flow dropped 31.5 percent between 2019 and 2020 and remained flat around the 2020 levels between 2021 and 2023.
In its October 2023 analysis, KBRA noted that the $260 million CMBS loan is collateralized by a single, nonrecourse, first-lien mortgage loan secured against Brookfield’s fee simple interest — an absolute ownership covenant — in a 535,446-square-foot portion of the mall, roughly 48 percent of the property.
The ratings firm added in its October 2024 note that the implied loan-to-value ratio stands at 163 percent, compared to 78.5 percent at securitization 12 years ago, which implies a principal loss of about $101.0 million to the CMBS trust.
Brookfield did not respond to requests for comment.
Brian Pascus can be reached at [email protected]