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wo South Florida zombie malls face a bleak future as their owners struggle to refinance maturing nine-figure loans next year. Despite recent interest rate cuts, Simon Property Group and Brookfield Asset Management will find it challenging to convince lenders that Miami International Mall in Doral and Pembroke Lakes Mall in Pembroke Pines can be turned around into viable retail assets.
Adding apartments could be the most logical solution for these malls, creating a steady stream of customers and generating additional revenue. However, both malls have experienced declining foot traffic and dwindling revenue due to tenant departures and widening vacancy rates. As a result, CMBS research firms like KBRA and Morningstar have issued warnings about Simon's and Brookfield's ability to secure refinancing.
Simon owns the central component of Miami International Mall, while Brookfield owns most of Pembroke Lakes Mall. Both malls have seen significant declines in market value over the past decade, with Miami International Mall's market value plummeting by 59% since 2014. Meanwhile, Brookfield has a $260 million interest-only loan secured by Pembroke Lakes Mall that matures in March.
Experts say that Simon and Brookfield will need to show lenders positive cash flow increases and decreasing loan-to-value ratios to secure new loans. They should also consider signing new tenants that convert the properties into entertainment centers or mixed-use developments with apartments, retail space, and other amenities.
Redevelopment is likely the best option for these malls, as owners of other struggling malls across South Florida are either partnering or selling to residential developers. For instance, Galleria Fort Lauderdale mall is looking for a buyer willing to pay over $100 million for the property, which is permitted for 1,899 residential units.
Simon and Brookfield may not have to partner with another developer at Miami International Mall, as Easton Group has already paid Seritage $17.1 million for a shuttered Sears store at the mall, planning to redevelop it into a mixed-use complex with 450-500 apartments.
