Simon Property's Miami Mall Value Plummets by 50% Amid Ongoing Lender Talks

Miami International Mall, located in Doral, Florida, has seen a significant drop in its valuation. As of July, the mall was appraised at $159 million, a sharp decline of 59% from its $391 million valuation in 2013. This downturn reflects ongoing financial difficulties, particularly after Simon Property Group, the owner of the mall, failed to repay a commercial mortgage-backed securities (CMBS) loan when it matured in February. This led to the mall being placed into special servicing.

Property Details and Loan Extensions

The mall, encompassing over 1 million square feet including big-box anchor tenants, is partially covered by the CMBS debt, which only applies to a 303,000 square foot portion owned by Simon. After missing a crucial balloon payment, Simon managed to secure a one-year forbearance on the debt by providing $2 million in equity. To further extend the forbearance into 2025, Simon could contribute an additional $3 million, a move seen as highly probable by industry experts.

Competitive Pressures and Mall Performance

Despite the mall's financial challenges, it has shown resilience, outperforming expectations in the first quarter of the year. The mall's debt service coverage ratio stood at 2.85 in March, with occupancy rates improving by 24% since the end of 2023. Revenue reached $6.9 million with $1.6 million in expenses during this period. A special reserve fund, established as part of the forbearance agreement, will split excess revenue between Simon and the debt service, potentially accelerating debt reduction.

Potential Redevelopment and Strategic Moves

Miami International Mall faces stiff competition from nearby Dolphin Mall and Dadeland Mall. However, there are opportunities for redevelopment, especially if Simon gains control of the entire property. The company has already ventured into multifamily developments, planning to add up to 2,000 residential units across its properties. In San Diego, Simon partnered with Amli Residential to develop 850 luxury apartments, signaling a broader strategy of integrating multifamily elements into its real estate portfolio.

Simon's Financial Position and Outlook

Simon Property Group, the largest mall owner in the U.S., reported robust financial results in the second quarter, with net income rising to $493.5 million. The company's stock has appreciated by over 11% this year, driven by stronger-than-expected retail sales. Simon’s CEO, David Simon, emphasized the company’s solid financial footing, highlighted by the refinancing of 10 properties in the first half of the year, and expressed confidence in managing future debt maturities.