With the continued rise of e-commerce punishing retailers, and in turn, those who rent space to them, some mall landlords are deciding it's best to walk away from struggling properties, writes Esther Fund in the WSJ.
The lenders, in turn, are then forced to sell the distressed properties at fire-sale prices.
In the first 11 months of 2016, 314 loans secured by retail property were liquidated, up 11% from the same period a year earlier. "There have been some draconian losses for the enclosed mall business," says James Hull, whose firm purchased five malls out of foreclosure last year.
Among those turning to "jingle mail" was Simon Property Group (NYSE:SPG) which last year defaulted on a loan secured by Greendale Mall in Worcester, MA.
Washington Prime Group (NYSE:WPG) late last year said it was considering turning malls in Grand Junction, CO and Lancaster, OH back to lenders, and said two others had been foreclosed on.
CBL & Associates (NYSE:CBL) has rid itself of 14 malls since 2014, with six of those handed back to lenders.
The good news: While consumer defaulters typically get their credit trashed, thus far neither SPG, WPG, or CBL have had downgrades. If anything, says Fitch, walking away from bad assets is viewed positively as it shows spending discipline.
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