August 25, 2010

Regional mall operator Macerich recently stopped making mortgage payments

As you know Macerich is the Lessor which manages Lakewood Shopping Center, Stonewood Shopping center, and Los Cerritos Mall. As reported in the Wall Street Journal today "Companies such as Macerich Co.... have recently stopped making mortgage payments to put pressure on lenders to restructure debts. In many cases they have walked away, sending keys to properties whose values had fallen far below the mortgage amounts, a process known as "jingle mail." These companies all have piles of cash to make the payments. They are simply opting to default because they believe it makes good business sense."

We have also heard rumors that many tenants in Lakewood Center Mall are behind in rent payments. A few have also been asked for large increases in rent. Not sure of the reasons.

As we all know the city of Lakewood relies heavily on the mall for income and it is one of the few things that separates Lakewood from cities like Paramount and Bellflower that have no such regional malls. The problem of course is that with so many regional malls in the area it is hard to keep those malls profitable for the city. It will be interesting how this recession will play out on commercial property as we have a long way to go before we are out of the woods. The jobs report is dismal for as far as the eye can see in California and that continues to depress new home sales.

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