A sign of troubling times: the biggest shopping mall in the U.S., Mall of America, has already missed two months' worth of mortgage payments. A sign of the damage that the global health crisis has been inflicting in the U.S. retail business.
In a report, the Mall of America said in a statement that it has been making partial payments on its mortgage while meeting other operating expenses. They did confirm that their revenue has significantly dropped due to the COVID-19 pandemic causing the firm to miss full payments on its mortgage obligations.
The Mall of America is situated in Bloomington, Minnesota, and is operated by Triple Five Group. The management has already sent a notice to its master servicer that overseas the malls' mortgage, Wells Fargo, about their financial troubles. They said they remain in communication with their lenders and understand their current situation.
The Financial Times and CNBC previously reported that Mall of America is delinquent on its $1.4 billion mortgages. The reports said that the developers who own MOA had missed their April and May mortgage payments this year.
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The report seems to confirm the troubles that beset Triple Five Group, as told by Don Ghermezian, American Dream co-CEO, in an interview back in April. In the article, he revealed the company's growing concerns regarding some of the tenants that are defaulting on their rent, which impacts Triple Five Group's ability to pay their mortgage.
MOA is not alone in this financial suffering, though. Many other businesses are skipping on their mortgage payments as the pandemic forced businesses to shut down. Financial Times cited data from Trepp, CMBS' data provider, which showed that the number of loans on the watch list has increased by almost 80 percent since the health crisis began impacting financial markets in the U.S. last February.
Trepp senior managing director, Manus Clancy, in an interview with CNBC, said that retailers had been hit the hardest by the global health crisis, apart from hotel owners. Delinquent retail loan percentage, in fact, has already surpassed the highest level it reached during the financial crisis, and it is possible that it could reach higher levels, Mr. Clancy added.
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In mid-May alone, the percentage of loans bundled into the commercial mortgage-backed deals that were delayed in their mortgage payment by 30 or more days to be at 7.3 percent. In April, the figure was just 2.3 percent.
Industry experts say that delinquencies are seen to remain at high levels until people are confident to go out and visit hotels, malls, and other shopping establishments again. Allowing businesses to reopen while observing social distancing will help keep some business survive, but some may not survive with less than 60 percent capacity.
The Mall of America was initially planned to be reopened on June 1, 2020, as lockdown measures are expected to be lifted in the state at that time. The plan is to let retail stores operate again with limited trading hours while restaurants and attractions will remain closed. The Mall of America shut its doors last March 17, 2020, due to the coronavirus pandemic.
