CT mall gets a new owner following foreclosure

Simon Property Group and fellow investors reportedly have completed the transfer of the Crystal Mall to lenders, rather than pay off $81 million due on a commercial mortgage secured by the Waterford mall.

CoStar reported last week that a commercial-mortgage-backed security for the Crystal Mall is now under the oversight of a “special servicing” firm called Rialto Capital, which is co-owned by Stone Point Capital based in Greenwich. In a report last week, Fitch Ratings identified the original security as having been issued by the UBS-Barclays Commercial Mortgage Trust pooling investments from a range of clients.

The town of Waterford last appraised the mall at just under $60 million — about $8 million below the cost to replace the structure, not including department store anchor pads and standalone restaurants. But Trepp reported last year that the mall’s value had plunged 88 percent to below $19 million, one of the five steepest drops nationally for retail properties.

In its annual report earlier this year, Simon disclosed its loan on the Crystal Mall carried a 4.46 percent interest rate, putting its annual debt service at $4.7 million. As of September, Simon listed more than $1.3 billion in cash and liquid assets on the corporate ledger.

Simon is the largest mall operator in the United States; in Connecticut it has one remaining shopping center in the Clinton Premium Outlets on Interstate 95 east of New Haven.

In 2015, the Crystal Mall got fresh regional competition east of the Connecticut River in the Tanger Outlets Foxwoods, less than a 30-minute drive away at the Foxwoods Resort Casino. And many shoppers have been gravitating toward open-air shopping centers like the Waterford Commons opposite the Crystal Mall, though Connecticut malls have continued to expand their offerings to compete with entertainment venues, restaurants and events.

On Tuesday, the CEO of Simon Property Group referenced a “negative mall narrative” that continues to hang over the industry, without mentioning the Crystal Mall loan.

“Many have tried to kill off physical retail real estate and in particular enclosed malls,” said CEO David Simon, speaking on a conference call. “I need not remind you when physical retail was closed in COVID, all the naysayers saying that physical retail was gone forever. However, brick and mortar is strong. Brick-and-mortar retailer is strong, and ecommerce is flat-lining.”

Simon had already handed off the Crystal Mall’s day-to-day management and leasing to Spinoso Real Estate Group, which has been actively promoting mall stores and events on social media.

JCPenney is the lone remaining anchor store at the Crystal Mall, with Buffalo Wild Wings and LongHorn Steakhouse having large restaurants there. Macy’s closed its department store there in 2020, at the end of the first holiday shopping season of the COVID-19 pandemic.

Vacancies had been creeping up already at the Crystal Mall, however, with Sears closing two years before Macy’s. And Bed Bath & Beyond announced last month it would close its store there, along with one in Stamford at the Ridgeway Shopping Center. Fitch Ratings listed the mall’s occupancy rate at 41 percent as of July, well below the 94.5 percent mark Simon reported across its retail portfolio as of September.

On Tuesday, Simon reported a $174 million profit in the third quarter, up $9.2 million from a year earlier or 5 percent.

Opening in 1984, the Crystal Mall has just over 780,000 square feet of space on two levels, making it one of the 10 largest malls in Connecticut. The mall property totals about 30 acres on the Hartford Turnpike near the junction of Interstate 95 and I-395, making it a possible candidate for redevelopment.

In Trumbull, apartments are now being built adjacent to the Westfield Trumbull, whose Australia-based owner has signaled its intent to sell off its U.S. malls, but with no deal announced for Westfield Trumbull.

Malls continue to generate investor interest in Connecticut, including the Brass Mill Center in Waterbury and an adjacent shopping center which sold last spring for $45 million. And Danbury Fair’s owner took out a fresh loan on the property this year, while lining up Target to take over its vacant Sears storefront.