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Sports Arena redeveloper delinquent on $190 million loan

Keeping or killing the Midway venue in the era of Covid-19

Rents have been plunging at White Marsh Mall, the biggest shopping center in Baltimore.
Rents have been plunging at White Marsh Mall, the biggest shopping center in Baltimore.

A unit of the Toronto investment behemoth that bankrolled the demise of San Diego's Midway area height limit in the form of this month's successful Measure E is falling short on mortgage payments to retire a multi-million-dollar debt.

A subsidiary of Brookfield Asset Management is more than 60 days delinquent on a $190 million ln so-called Commercial Mortgage-Backed Securities secured by the White Marsh Mall in Baltimore, Maryland, according to TheRealDeal.com.

Rents have been plunging at the shopping center, the biggest in Baltimore, in the wake of the Coronavirus pandemic and the loss of Sears, an anchor tenant, the report says. Amazon is now using the Sears parking lot for its delivery vehicles.

The loan, set to expire in May of next year, was originated by Wells Fargo in 2013. Brookfield, which hasn't made a payment on the debt since July, has of late been telling investors and lenders not to become concerned about the pandemic's impact on the commercial real estate business.

"The crisis has reinforced a couple of things we already knew," Brookfield Asset Management's Andrea Balkan told CommercialObserver.com last week.

"First, don't panic — things are never as good as they look during a boom or as bad as they look during a downturn. Second, sponsorship is as important as the quality of the real estate." And many reports say Brookfield still has lots of cash.

"The willingness of Brookfield Property Partners LP, Starwood Capital Group, Colony Capital Inc., and Blackstone Group Inc. to skip payments on commercial mortgage-backed securities backed by hotels and malls illustrates how the economic fallout from the coronavirus has devalued some real estate while also creating new targets for these cash-loaded investors," Bloomberg.com reported August 24.

This fall, Brookfield Property Partners partnered with shopping mall giant Simon Property Group in a deal to purchase the ailing assets of bankrupt J.C. Penney for $800 million in a bid to keep Penney's department stores from vacating distressed malls.

Whether Brookfield's potentially lucrative San Diego sports arena deal – for which termed-out Republican Kevin Faulconer engineered the height limit's demise – finds ultimate financial success or requires a bailout remains be seen.

After spending more than $400,000 on the Measure E campaign, Brookfield must now manage to hold on to the putative city franchise awarded it by the lame-duck mayor and ultimately deliver a Covid-proof venue.

Switching business strategies, including bankrolling a forest of condo towers in place of the sports arena, would likely require Brookfield to retain a new corps of city lobbyists to win city backing from the new mayor, Democrat Todd Gloria.

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Rents have been plunging at White Marsh Mall, the biggest shopping center in Baltimore.
Rents have been plunging at White Marsh Mall, the biggest shopping center in Baltimore.

A unit of the Toronto investment behemoth that bankrolled the demise of San Diego's Midway area height limit in the form of this month's successful Measure E is falling short on mortgage payments to retire a multi-million-dollar debt.

A subsidiary of Brookfield Asset Management is more than 60 days delinquent on a $190 million ln so-called Commercial Mortgage-Backed Securities secured by the White Marsh Mall in Baltimore, Maryland, according to TheRealDeal.com.

Rents have been plunging at the shopping center, the biggest in Baltimore, in the wake of the Coronavirus pandemic and the loss of Sears, an anchor tenant, the report says. Amazon is now using the Sears parking lot for its delivery vehicles.

The loan, set to expire in May of next year, was originated by Wells Fargo in 2013. Brookfield, which hasn't made a payment on the debt since July, has of late been telling investors and lenders not to become concerned about the pandemic's impact on the commercial real estate business.

"The crisis has reinforced a couple of things we already knew," Brookfield Asset Management's Andrea Balkan told CommercialObserver.com last week.

"First, don't panic — things are never as good as they look during a boom or as bad as they look during a downturn. Second, sponsorship is as important as the quality of the real estate." And many reports say Brookfield still has lots of cash.

"The willingness of Brookfield Property Partners LP, Starwood Capital Group, Colony Capital Inc., and Blackstone Group Inc. to skip payments on commercial mortgage-backed securities backed by hotels and malls illustrates how the economic fallout from the coronavirus has devalued some real estate while also creating new targets for these cash-loaded investors," Bloomberg.com reported August 24.

This fall, Brookfield Property Partners partnered with shopping mall giant Simon Property Group in a deal to purchase the ailing assets of bankrupt J.C. Penney for $800 million in a bid to keep Penney's department stores from vacating distressed malls.

Whether Brookfield's potentially lucrative San Diego sports arena deal – for which termed-out Republican Kevin Faulconer engineered the height limit's demise – finds ultimate financial success or requires a bailout remains be seen.

After spending more than $400,000 on the Measure E campaign, Brookfield must now manage to hold on to the putative city franchise awarded it by the lame-duck mayor and ultimately deliver a Covid-proof venue.

Switching business strategies, including bankrolling a forest of condo towers in place of the sports arena, would likely require Brookfield to retain a new corps of city lobbyists to win city backing from the new mayor, Democrat Todd Gloria.

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2

This is how these multinational companies work. They will move on as soon as an investment is no longer profitable. Malls worldwide were in trouble long before Covid. Anything the City of San Diego is involved in, like Ash street, will go south and the taxpayers will be stuck with the bill. Just another reason not to live in the City of San Diego.

Nov. 17, 2020

This is an excellent piece of reporting, clear and concise.

If any developer involved in retail space is current on its debt now, I would be surprised. Bricks-and-mortar retailing has been on a downslope for a long time, and the pandemic has made it worse even faster. The demise of Sears and pending demise of JC Penney will leave those malls with few, if any, anchors, and without them the concept of the mall doesn't work. Locally Sears closed its last location in Westfield North County, and the Nordstrom there will not reopen. That leaves the mall with only two department stores, Macy's and Penney. (It opened in 1985 with six of them.)

This mostly-Canadian developer will need to get its debt current before it can attempt anything ambitious in redeveloping the sports arena. The developers, just because they are big doesn't mean they are smart. Anyone looking to create new retail space now is insane or in denial. Scads of former retail space will come on the market soon, looking to be repurposed. The success in getting SD voters to take off the height limit may prove an empty win for them it they can't make use of the property.

Nov. 17, 2020

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