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A major credit rating firm has significantly lowered the estimated value of Westfield Corp.'s Sarasota Square Mall in Sarasota County, a move that follows the departure of two key anchors and several inline tenants over the past two years.
Morningstar Credit Ratings says the nearly 1 million-square-foot mall's value has fallen by roughly 70%, to $39 million, in the wake of the loss of anchor Macy's and the pending exit this fall by Sears.
The mall's current anchors include Costco Wholesale Corp. and J.C. Penney.
Morningstar notes the 8201 S. Tamiami Trail mall's value had been $128.4 million in 2013, at the time of a commercial mortgage-backed security (CMBS) issuance.
With the estimated drop in value, Westfield's loan-to-value ratio has climbed to 97.4%. Typically, loan-to-value ratios on commercial properties range from 65% to 80%.
Westfield officials declined to comment.
Morningstar says it does not believe the mall is in danger of imminently defaulting on its debt, but “we believe there is a long-term maturity risk, especially as the loss of two anchors makes it unlikely that a lender will provide a takeout loan by the loan's 2023 maturity date,” according to a recently issued CMBS report.
“Even though the year-end 2016 cash flow suggests a debt yield above 10%, further deterioration will make refinancing the property questionable as lenders shy away from the risk of smaller, less dynamic malls, especially if additional stores close,” Morningstar noted.
Westfield acquired Sarasota Square in October 2003 for $77 million, records show. The mall was fully renovated in 2009 at a cost of $50 million, when a 12-screen AMC Theater was installed together with 25,000 square feet of new retail space.
(The headline of this story was changed to reflect the proper term of the Morningstar report.)
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