Macerich, the real estate investment trust (REIT) known for its portfolio of high-profile shopping centers, is facing challenges with its Santa Monica Place property. The upscale mall, located at 395 Santa Monica Place, has seen its value drop to $255 million, a 35 percent decrease since its loan entered special servicing in April. According to Morningstar Credit, this represents a 59 percent decline from its original valuation of $622 million when the loan was issued.
The $300 million loan default, the second in two years for the property, underscores the struggles of the 534,000-square-foot shopping center. Key tenants like Bloomingdale’s and Arclight Theatre vacated approximately 150,000 square feet in 2021, further exacerbating the property’s vacancy issues. Despite plans for a $35–$40 million redevelopment to revitalize the space, progress appears uncertain as the mall’s financial woes mount.
Under CEO Jackson Hsieh, Macerich has embarked on an aggressive strategy to reduce its debt by $2 billion, focusing on selling underperforming properties. Santa Monica Place is among several assets the company has listed for sale, alongside the Shops at Atlas Park in New York and Southridge Mall in Iowa, according to a report in The Real Deal. In a recent quarterly earnings call, Hsieh confirmed that Macerich is also in the process of selling The Oaks Mall in Thousand Oaks for $157 million and has ongoing discussions with lenders and potential buyers for four additional properties, including Lakewood Center in California.
While Macerich navigates these challenges, its attention remains on retaining and enhancing its “Fortress centers,” high-performing assets that are integral to its long-term strategy. Local examples include the Los Cerritos Center, a 1-million-square-foot property partially entitled for multifamily development, and Washington Square in Portland, which has the potential to elevate to Fortress status through the addition of luxury tenants.
Santa Monica Place’s struggles reflect broader challenges in the retail real estate market, including shifts in consumer behavior and tenant turnover. Once a premier destination, the mall’s decline signals the need for innovative repositioning strategies to attract new tenants and reinvigorate shopper interest.
Macerich’s decisions in the coming months, from securing buyers to negotiating with lenders, will play a pivotal role in determining the future of Santa Monica Place and the REIT’s broader portfolio. For now, the company’s focus on asset sales and debt reduction highlights a critical moment in its ongoing efforts to stabilize and adapt to a volatile market.
