Santa Monica’s Macerich Co. might want to consider a Black Friday sale for its hometown property, Santa Monica Place Mall, after its ongoing financial struggles at its once flagship location have prompted a massive decline in value and prompted attempts to find a buyer for the property.
Credit rating agency Morningstar recently reported the mall’s value has declined 59% since 2017. The news joins reports from commercial real estate analysis company Trepp that the Mall’s vacancy rate is now 69% and that efforts to repay its large loan have once again fallen short.
The company first defaulted on the $300 million mortgage for Santa Monica Place earlier this year saying it would return ownership to the lender. The company, which has owned the mall since 1999, cited financial challenges, including declining property value and difficulties in finding a long-term strategy. However, Trepp said the company did manage to make payments on the loan since its initial default before missing payments again in August.
Macerich CEO Jackson Hsieh, said earlier this month that Santa Monica Place was one of several properties the company would like to sell alongside the Shops at Atlas Park in New York, Southridge Mall in Iowa and The Oaks mall in Thousand Oaks.
Santa Monica Place, originally designed by Frank Gehry, underwent a $265 million renovation in 2010 to transform it into an open-air center. However, the mall faced declining occupancy in recent years as major retailers departed, leaving space for pop-ups like the Barbie exhibit and plans for the Din Tai Fung restaurant.
The mall’s struggles are mirrored in other Downtown property owners. Federal Realty Investment Trust sold its portfolio of Promenade properties earlier this year. The eight buildings were sold to two buyers. Seven of the eight were sold to Daniel Negari, a tech founder, for a combined $84.5 million. The last building was sold to United El Segundo, a gas station-operator-turned-developer, which spent $19.5 million.
Beverly Hills developer Leo Pustilnikov said recently he is negotiating with UBS Real Estate to address a loan default on his retail property at 1241-1247 3rd Street Promenade. The bank filed the notice citing $18.9 million past due as of September. Pustilnikov, who purchased the property for $24.5 million four years ago, cited challenges in refinancing due to the current high-interest rate environment.
City Hall has reacted to the news by citing new investments in the area including new businesses opening in the area. According to the City of Santa Monica, more than $1 billion is being invested in Downtown Santa Monica, including new hotels and more than 1,300 new apartments bringing new residents to the area to support downtown businesses.
According to the city, Santa Monica's total retail sector encompasses about 770 businesses employing 10,077 people, representing 12% of the city's total workforce, with an annual payroll of $874 million (8% of the citywide total). In 2023, these businesses generated $3.2 billion in taxable sales, 28% of which came from Downtown Santa Monica.
In a statement, City Hall said it remained optimistic about the local economy.
“We remain optimistic about shopping and dining in Santa Monica, with more than $1 billion in investment happening downtown and a flurry of recent openings on the Promenade in just the past few months,” said the statement.
“We are confident in the future of the Santa Monica Place site, and we appreciate and support Macerich’s continued investment in the mall in the interim, even despite financial challenges. We’re looking forward to seeing Arte Museum, Din Tai Fung and Club Studio Fitness opening soon to bring new excitement to the mall and downtown Santa Monica.”
matt@smdp.com
