A landowner defaulted on a $300 million loan in Santa Moscow. This is just the latest financial disaster facing the city. Thanks to this and other evaluation of property, property taxes revenues will decrease as spending by the city increases. This is how you get in a DOOM LOOP.
“Locally-based shopping mall behemoth Macerich Co. has defaulted on the $300 million mortgage loan it has for the Santa Monica Place, ultimately returning it to the lender and bidding farewell to the iconic shopping mall it has owned since 1999.
“It was pretty clear that Santa Monica has continuing issues and it is under water,” Scott Kingsmore, Macerich’s chief financial officer and treasurer told WWD. According to that publication, the broker valuation for Santa Monica Place is in the region of $264.5 million. “Ultimately, trying to figure out the end game was just too obscure,” Kingsmore said.”
Macerich to return Santa Monica Place mall to lenders, adding to economic fears
by Scott Snowden, Santa Monica Daily Press, 6/13/24 https://smdp.com/2024/06/13/macerich-to-return-santa-monica-place-mall-to-lenders-adding-to-city-exodus/
Locally-based shopping mall behemoth Macerich Co. has defaulted on the $300 million mortgage loan it has for the Santa Monica Place, ultimately returning it to the lender and bidding farewell to the iconic shopping mall it has owned since 1999.
“It was pretty clear that Santa Monica has continuing issues and it is under water,” Scott Kingsmore, Macerich’s chief financial officer and treasurer told WWD. According to that publication, the broker valuation for Santa Monica Place is in the region of $264.5 million. “Ultimately, trying to figure out the end game was just too obscure,” Kingsmore said.
Macerich announced the failure to pay the loan earlier this year during its first quarter earnings report. At the time, the company said it had lost $126.7 million or $0.59 per share-diluted during the first quarter of 2024, compared to the net loss attributable to the Company of $58.7 million or $0.27 per share-diluted attributable to the Company for the quarter ended March 31, 2023.
It also announced several measures to address problems including refinancing of other loans, extensions of loans and possible ways to shed property.
“On April 9, 2024, we defaulted on the $300 million loan on Santa Monica Place. The Company is in negotiations with the lender on terms of this non-recourse loan,” said the report.
Although it said it was working on the terms of the loan, the report also said sale of unnamed property was a possibility.
“Under new leadership, we are focused on a strategic plan to reduce our Net Debt to EBITDA leverage to a level in the low to mid-6x range over the next few years. This plan may be effected through a variety of methods, including various asset dispositions and acquisitions, organic growth in EBITDA as our robust lease pipeline opens for business, and opportunistically issuing equity. We have already started to execute on that plan, including property sales, potentially returning assets to lenders and buying out joint venture interests on certain assets.
Santa Monica Place, opened in 1980, initially aimed to revitalize Third Street Promenade and became it’s own destination. Designed by Frank Gehry, it went through changes over the years, with Macerich buying it in 1999. Plans to replace it faced opposition, leading to a scaled-back renovation in 2007. The $265 million project in 2010 transformed the mall into an open-air center with retail shops and a food court.
In recent years the mall has seen an exodus of once bankable stores. A movie theater opened, then closed. The Disney store left and Bloomingdale’s departed. Tyra Banks also had a brief occupancy at the mall with her Modelland concept and an ice cream store. Post-Covid, a large area has been occupied by pop-up concepts including the popular Barbie exhibit and there were high hopes that the long-awaited restaurant, Din Tai Fung dumpling house, would revitalize the area.
Din Tai Fung is a Taiwanese restaurant specializing in Xiao Long Bao, or soup dumplings. The chain currently has one outlet in Las Vegas, five in Washington state and seven dotted around Southern California, plus another 160 or so locations in 12 other countries worldwide. With a menu that now includes steamed buns, house-made noodles and vegan dishes, the brand has won many awards and accolades.
The Mall has hosted several popular pop-up exhibits, including a Barbie tie-in. Similar projects have also drawn crowds along the Promenade. Pop-ups planned for 2024 include Accidentally Wes Anderson: The Exhibition (May – June) and Santa Monica Spheres: Haibu’s World (July).
A spokesperson for Macerich previously confirmed that the Arte Museum was still planning a “50,000 square foot immersive, digital art destination,” despite being first announced in January 2023, but no details were available of when that might arrive.
Multiple calls to Macerich and Santa Monica Place regarding the sale of the property were not returned.
Vice Mayor Lana Negrete said she hoped negotiations between Macerich and its lenders would continue.
“This is an opportunity for us to take a hard look at our retail spaces and engage closely with property owners to see what is needed to bring in retailers while bringing originality to the promenade. The city is working on safety and our downtown police unit has been very present on 3rd street. We do not own the buildings or negotiate retail leases; the landlords do. As more businesses come in possibly with creative lease terms then more will follow suit and we will see a change,” she said. “Macerich has been a great city and community partner and I hope they continue to operate the mall. If that changes I’m sure whoever it is will want to make the investment successful and to do so they will need to work with DTSM, promenade property owners and the city to orchestrate a comeback.”
This news comes as Federal Realty Investment Trust announced that they were selling their Third Street storefronts for $103 million. This means that the Maryland-based real estate company ends a nearly 30-year presence on the Promenade. A total of eight buildings, mostly in the 1200 block, which equates to 185,000 sq ft at $556 per sq ft, has been reportedly sold, but the buyer has not been officially announced yet.
According to an annual filing, the investment cost the company in the region of $29 million over the four year period between 1996 and 2000, when it purchased its first site. However, the steady decline of business investment in the downtown area, added to concerns over homelessness and crime, has meant that well known brands have abandoned the centralized retail area. Consequently, Santa Monica has struggled to return to pre-Pandemic levels of commerce.
A recent article in SFGate said that a quarter of the Third Street Promenade is available to lease. However, according to a statement by City Manager David White on the City of Santa Monica’s website, “Millions of dollars are being invested here. New stores are opening and many others are in progress.”
Officials from Downtown Santa Monica, Inc. (DTSM, Inc.) were traveling Thursday and could not respond to requests for comment. However, the organization sent out a press release prior to the news breaking regarding the mall’s ownership change announcing twenty-four new businesses coming to the area. The release said simplified zoning and permitting rules had facilitated significant capital investment and positive economic growth downtown.
“The investment happening in Downtown Santa Monica reflects the ongoing commitment to revitalization and economic development in the area,” said DTSM, Inc. CEO Andrew Thomas. “The diverse number of new developments either planned or under construction underscore the confidence that still exists in the city’s vitality as a premier destination for growth and future projects.”
The release cites the highly-anticipated return of Barnes & Noble, international fitness brand JD Sports, variety store MINISO and craft milk tea brand Odd One Out on the Promenade as well as Brazilian steakhouse Fogo de Chão on Ocean Boulevard. Additional businesses listed as coming soon include award-winning AJA Vineyards wine tasting, Candles on Tap custom candle bar and Rooftop Cinema Club open-air film venue (planned for parking structure six).
DTSM said events and programming have also boosted foot traffic recently. According to the release, in the past year, DTSM, Inc. produced 29 events, partnered with producers to bring 27 additional events to the Downtown and oversaw 24 third-party events and brand activations. The final quarter of 2023 saw a 9.3% increase in visitors to the Promenade, totaling one million, with each visitor spending an average of one hour and 17 minutes Downtown. In total, Downtown Santa Monica hosted 80 events with notable partnerships such as 626 Night Market, Conscious Market and Solidarity & Celebration: A Black History Month Festival.
Officials cite Ice at Santa Monica skating rink (124,000+ visits; $1.1 million revenue), SaMo Pride Festival (11,500+ attendees) and Easter Celebration (8,400+ attendees) as evidence of their success and say new hotel construction/housing units planned for downtown will also help with economic revival.
