The owners of the Westminster Mall say they’ve found an apartment developer to build a substantial mixed-use project on a portion of Orange County’s 13th-largest shopping center by taxable sales.
The deal could provide a financial lifeline to the owners of the enclosed shopping center, Columbus, Ohio-based Washington Prime Group Inc.
The $128 million-valued real estate investment trust (NYSE: WPG) currently isn’t paying the mortgage for the mall, which outside of anchor tenants with exterior entrances like Macy’s and JCPenney has been largely shuttered over the course of the pandemic.
Officials with Washington Prime said earlier this month that they had signed a letter of intent with “a nationally recognized development company” to build a multifamily project on excess land surrounding the mall, which runs alongside the San Diego (405) Freeway, next to Bolsa Avenue.
The mall counts some 1.1 million square feet of retail space and is on about 100 acres in total. About half of that acreage could in theory be used for redevelopment, based on prior, early-stage city discussions over ways to upgrade the property.
City filings from last year suggest a likely multifamily project would consist of buildings running from three to six stories along Bolsa Avenue and Edwards Avenue.
Offices and hotel development have also been considered for excess land at the mall, though no progress on that front, or other potential development partners, have been announced.
Along with Washington Prime, there are other owners of individual properties on portions of the mall’s grounds, such as the Macy’s and Target anchors spots at the center.
$50M Haul
The size of the apartment project that Washington Prime envisions hasn’t been finalized, and still needs to go through the entitlement process. The developer’s name hasn’t been disclosed.
Washington Prime Chief Executive Louis Conforti said the deal, when completed, should net proceeds for the REIT “in excess of $50 million,” while allowing the company to retain ownership of the existing retail portion of the site.
Building residences nearby should also ultimately help boost retail traffic to the center, he said.
Westminster Mall brought in about $194 million in taxable sales last year, according to Business Journal research.
The apartment development disclosure was made during Washington Prime’s second-quarter earnings call.
Loan Hiatus
The REIT was formed in 2014 when it was spun off from fellow mall owner Simon Properties Group Inc. (NYSE: SPG), which owns The Shops at Mission Viejo Mall, Brea Mall and Outlets at Orange.
Westminster Mall is Washington Prime’s only local holding.
Washington Prime has about $76 million in debt against the property, according to the REIT’s latest quarterly report, filed this month. The loan matures in 2024 and counts a 4.65% interest rate.
Payment on the loan is currently on hiatus.
The REIT got a three-month loan forbearance agreement with its lenders for the property, for both the loan’s principal and interest, beginning in June.
The local mall is one of several properties in Washington Prime’s portfolio which has received a forbearance agreement of late. It’s not known if the agreement for Westminster Mall will be extended beyond August.
CMBS Issues
The mortgage is tied to a J.P. Morgan-run commercial mortgage backed security deal; the CMBS deal was downgraded by credit ratings agency Fitch Ratings in April, which noted Westminster Mall as the largest “loan of concern” in that specific CMBS offering.
The OC mall represents about 4.5% of the total loan pool in the CMBS offering; other Washington Prime loans in the same pool are in special servicing, but Westminster Mall was not as of April, according to the Fitch report.
Fitch noted the departure of Sears as a tenant in 2018 and the expiration of a JCPenney lease at Westminster Mall next year as the biggest drags on the center’s occupancy rates.
