Southridge Mall’s ownership will be transferred to its lender through a deed in lieu of foreclosure, according to a new report — following an earlier report forecasting the same fate for the financially troubled property.
Simon Property Group Inc., which operates Southridge, recently disclosed plans for a “friendly foreclosure” for the Greendale mall and two other malls outside Wisconsin.
That’s according to a report from New York-based Kroll Bond Rating Agency.
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The financial performance of Southridge and the other malls has deteriorated significantly since Simon used the properties as collateral for the loans, the report said.
It also said Southridge has a 73% “in-line” occupancy rate.
“An in-line occupancy rate below 75% represented our highest risk category,” the report said.
That rate doesn’t take into account separately owned department store anchors — two of which have been vacant since 2018 at Southridge.
That’s when Kohl’s closed its mall store after opening a new one at the nearby 84 South mixed-use development in Greenfield, and Boston Store operator Bon-Ton Stores Inc. was liquidated.
Ali Slocum, vice president of public relations at Simon, one of the nation’s largest mall operators, didn’t respond to a request for comment about the pending foreclosure.
The Journal Sentinel on Oct. 2 reported that Southridge was in financial trouble.
That was according to a report from credit rating agency DRBS Morningstar.
That report said Southridge’s owner, an affiliate of Indianapolis-based Simon, had defaulted on a loan after missing a May payment.
As a result, the mall’s ownership was likely to be transferred to the lender through a deed in lieu of foreclosure, the report said.
The loan has $67.5 million still owed from its original $75 million amount, according to DRBS Morningstar.
However, the more recent Kroll Bond Rating Agency report said the Southridge loan balance is $112.5 million.
Southridge has taken steps in recent years to redevelop vacant space.
A Dick’s Sporting Goods, Golf Galaxy, Round 1 bowling and amusement center and TJ Maxx opened in a former Sears store in 2018 and 2019.
But a recent visit found around a dozen smaller vacancies along with the former Kohl’s and Boston Store — the latter of which the Village of Greendale is considering acquiring through the eminent domain process.
Greendale Community Development has scheduled an 8:30 a.m. Friday public hearing on that issue.
The decades-long decline in department stores, which have been traditional anchor stores, have hurt the nation’s malls.
That trend started with competition from TJ Maxx, Best Buy and other lower-cost chains, and also was affected by the growing market share of Amazon and other online retailers.
Southridge’s remaining anchors are Macy’s and J.C. Penney — department store chains that have seen their financial difficulties worsen during the COVID-19 pandemic.
Greendale provided $12 million to help Simon redevelop Southridge, which included bringing Macy’s to the mall in 2012.
Around $5.4 million is still owed by a Simon affiliate, and is to be repaid by the improved mall’s property taxes by 2024, said Todd Michaels, village manager.
Another $2 million in village financing help is being repaid through the more recent redevelopment of the separately owned former Sears building.
Southridge isn’t the only Milwaukee-area mall with challenges.
Brookfield Square’s operator, CBL & Associates Properties Inc., is reorganizing its finances under Chapter 11 bankruptcy protection.
This article originally appeared on Milwaukee Journal Sentinel: Troubled Southridge Mall will be given to its lender through a deed in lieu of foreclosure, report says