Brookfield Real Estate REIT, an entity under Brookfield Real Estate Partners, blocked $ 425 million in debt co-created by Morgan stanley, Barclays and Wells fargo refinance part of the huge Tyson Gallery mall in McLean, Va., according to the rating agency’s analysis of the transaction.
Commercial mortgage backed securities with a term of five years and interest rate only (CMBS) the financing repaid approximately $ 276.4 million of existing CMBS debt and covered approximately $ 24.5 million of initial reserves, as well as the costs of closing the transaction, according to the analysis by S&P Global Ratings, who evaluated the single-borrower arrangement. The sponsor was also able to recover more than $ 119 million in equity under the deal, of which approximately $ 39.3 million has been set aside for interim rent guarantees and unpaid tenant obligations for a handful of new tenants who are still building their spaces in a new redeveloped section of the mall.
S&P wrote that Brookfield Property REIT reported a baseline cost of around $ 500 million, meaning it still had around $ 75 million of equity in the over 740,000 square foot property at the time of filing. the closing of this loan.
The loan is secured by fee simple and leasehold interest from Brookfield REIT in a 488,244 square foot portion of Tysons Galleria, a three story gated mall located approximately 15 miles west of Washington, DC, in McLean, Virginia.
The shopping center was built in 1988 and is currently anchored by Neiman Marcus and Saks Fifth Avenue. The two brands own the space they occupy, which does not act as a guarantee for this CMBS loan.
There is a third anchor space which had previously been owned and occupied by Macy’s. Brookfield acquired the 260,000 square foot anchor box from Macy’s five years ago. In 2019, it repositioned $ 120.3 million to transform it into a multi-tenant space now geared towards entertainment uses, as well as for restaurants and small retailers, according to information from S&P.
The redevelopment of the old Macy’s space is still ongoing, but it is should be fully completed next year, according to data from S&P and DBRS Morningstar. There is still of about $ 24.5 million in obligations for the remaining leasehold improvements and, as of the end of August, construction work worth about $ 24.7 million was not yet complete. When completed, it will span nearly 195,000 square feet.
Brookfield has secured eight new tenants in the space that will occupy more than 192,000 square feet. At the start of this month, seven were still building their spaces, with plans to open by the end of this year or in the first quarter of 2022, while the furniture store Arhaus was the only tenant that was open, occupying approximately 3.1 percent of the total net leasable area.
Other tenants who have rented space in the former Macy’s anchor station include restaurants Court house and Cranes, Movie room CMX Cinebistro, Bowling alley Bowlero, furniture retailers Case and barrel and CB2, and Catering equipment. Electric car manufacturer Lucid engines has also leased space on the ground floor for a vehicle showroom and service center, according to information from S&P.
The collateral for that funding was nearly 93 percent leased at the start of this month, according to DBRS Morningstar analysis; the entire property, including the Neiman Marcus and Saks Fifth Avenue spaces, was approximately 95 percent leased. Overall, the regional mall has 11 major tenants and 69 smaller online tenants, all open and operational as of the start of this month, according to data from S&P.
For the past 15 years, the mall has maintained occupancy rates above 90%, per S&P.
It is also connected to The Ritz-Carlton, Tysons Corner hotel, which is not part of this funding.
Mack Burke can be contacted at [email protected].