They call it "jingle mail" when a property owner sends the keys back to the bank instead of a mortgage payment. When mall owners send jingle mail, investors take notice.
Between January and November 2016, landlords liquidated 314 retail property-backed loans totaling about $3.5 billion— an 11% surge from the same period a year earlier, according to data from Morningstar Credit Ratings. The liquidations resulted in a loss of $1.68 billion.
“We’re seeing a boatload of these kinds of properties coming to market,” said James Hull, managing principal of Augusta, Ga.-based Hull Property Group, which bought five malls from foreclosure sales in 2016, told The Wall Street Journal. “There have been some draconian losses for the enclosed-mall business.”
The industry's biggest and best capitalized players, including Simon, CBL and Taubman Centers, have walked away from malls they decided were not profitable enough. For example, CBL bragged to investors about shaving $95.4 million in debt fomr its balance sheet by letting lenders foreclose on Gulf Coast Town Center in Fort Myers, Fla., which it owned in a joint venture.
“It doesn’t negatively impact their corporate credit quality,” Steven Marks, head of Fitch Ratings’ U.S. REIT group, told the Journal. “If anything, we oftentimes view these transactions positively, as it indicates financial discipline to not commit corporate capital towards failing or uneconomic investments.”
In Pittsburgh, Wells Fargo bought the former Pittsburgh Mills mall for only $100. That seems like a deal, until you figure that the property's previous owners, Mills Corp. and Zamias Services owe the bank $143 million on the property.