Macerich, the Santa Monica-based real estate giant, is playing a high-stakes game of Jenga with its debt. As the third-largest shopping mall operator in the U.S., the company is not immune to the retail apocalypse that has decimated the industry.
In a move to reduce its $2 billion debt burden, Macerich recently announced its “Path Forward” plan, a strategic initiative aimed at shedding underperforming assets while doubling down on its “Fortress” and “Steady Eddy” properties, according to the company’s recent second-quarter earnings call.
The Mall of Victor Valley, located in the High Desert community of Victorville at 14400 Bear Valley Rd., is one such asset on the chopping block. With a $115 million loan secured in 2014 by JP Morgan coming due in September, Macerich faces a critical decision: refinance or default.
Despite the mall’s age and the challenging retail landscape, Macerich’s CFO, Scott Kingsmore, remains optimistic. With 99 percent occupancy and a loyal customer base, the Mall of Victor Valley is still the “only game in town,” he stated in the call.
Kingsmore sees potential in the mall’s “momentum” and believes it remains a “relevant” asset for the community. As a result, Macerich is close to securing an $85 million refinancing deal, a move that would provide the company with much-needed financial breathing room.
However, not all of Macerich’s properties are as fortunate. The company recently defaulted on a $300 million loan for the Santa Monica Place mall, a high-profile property that faces significant challenges.
Negotiations with the lender are ongoing, but the future of Santa Monica Place remains uncertain. Macerich’s CEO, Jack Hsieh, acknowledges the asset’s difficulties and admits that the capital structure is “upside down.”
Macerich’s moves are a testament to the changing retail landscape. As the industry continues to evolve, Macerich is betting on its “Fortress” properties, like the Mall of Victor Valley, to weather the storm and deliver long-term value.
