Thursday, October 10, 2019

Brookfield Mall Bounces Back in Heart of Pennsylvania Amish Country

Brookfield Property REIT completed a $135 million refinancing of its Park City Center, a 1.2 million-square-foot regional shopping mall that's had some success remaking itself because it's in the heart of one of Pennsylvania's main Amish tourist areas: Lancaster.

The deal is a bright spot for a center that has lost two of its five anchor tenants in the past year: Bon-Ton and Sears. Those retailers, like other big-box and department stores, filed for bankruptcy amid competition from growing e-commerce businesses and a shift in consumer spending habits.

JPMorgan Chase Bank provided the loan and is preparing to roll it into a new single-asset commercial mortgage-backed security. Brookfield Property used the money late last week to repay a $134.76 million balance on a loan held in a multiborrower commercial mortgage-backed security deal.

The previous loan had come due this past June with the noteholder allowing for a forbearance extension while the refinancing details were worked out, according to DBRS bond rating agency commentary from August. The loss of two anchor spots may have presented challenges in obtaining a replacement loan despite the center producing generally strong cash flows, according to DBRS.

“Despite the heightened concerns in the closure of two mall anchors in the last year within close proximity to the June 2019 maturity ... the loan benefits from strong sponsorship in Brookfield and a low leverage point ($112 per square foot),” DBRS analysts wrote.

Brookfield's success with revitalizing the mall stems partly from its location, according to DBRS.

The property sits in a major tourist area between Harrisburg and Philadelphia, near chocolate giant Hershey's headquarters and its large amusement park. Lancaster is also noted as the center of Pennsylvania Dutch Country and its Amish attractions.

Park City Center reported an unaudited net operating income of $10.25 million, according to a recent CMBS bondholder filing.

Brookfield Property did not respond to a request for additional information.

DBRS has been monitoring the previous loan following the departure this past March of Sears, which occupied 13% of the mall's net rentable area. In August 2018, Bon-Ton closed, leaving almost 15% of the mall empty.

Neither property looks to stand vacant much longer.

The 179,000-square-foot Bon-Ton building, in fact, may not be standing soon at all. The mall owner has filed to have the building demolished, LancasterOnline reported in August. That would open the site up to full redevelopment.

The 79,000-square-foot vacated Sears store is expected to be occupied by a Round1 multientertainment center, offering bowling, arcade games, billiards, karaoke, pingpong and darts, according to the Japan-based company, which is opening three facilities in the state next year as part of a U.S. expansion.

Brookfield Property acquired the property in August 2018 as part of its $15 billion acquisition of General Growth Properties.

These days, the mall’s tenant mix has higher-end tenants in Apple, Michael Kors, White House Black Market, Williams-Sonoma and Sephora, as well as popular retailers in H&M, Build-a-Bear and Journeys.

Sales for nonanchor tenants less than 10,000 square feet [excluding Apple] were reported at a healthy $389 per square foot in 2018, according to DBRS.

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