DeSoto Square Mall appears set to change hands
John Hielscher / Sarasota Herald-Tribune
BRADENTON – The owner of the long-neglected DeSoto Square Mall has listed the property for sale and might be close to a deal, a move that analysts say could prompt a renovation or other enhancement.
Simon Property Group — which has owned the mall for the past 16 years as its value plunged through recession and lack of upgrades — declined to discuss any potential sale, as did CBRE, the commercial real estate brokerage firm trying to sell the 693,000-square-foot mall.
But commercial mortgage analyst Trepp LLC has reported that a letter of intent to sell the 39-year-old mall has been signed by Simon and an unidentified buyer. Under terms of the deal, the buyer will also assume at least some debt on DeSoto Square, Trepp reported, citing information from a loan servicer.
Letters of intent are common instruments in the retail industry and do not guarantee an eventual transaction.
But experts said a sale could benefit the mall, resulting in new tenants and cosmetic improvements for DeSoto Square, anchored by Macy’s, JCPenny and Sears. A Dillard’s department store, which had been a fourth DeSoto anchor, closed in late 2009.
Simon’s timing in selling, too, may also be opportune, because investors are showing more interest of late in properties like DeSoto Square, which are considered secondary, or Class B malls, in the retail industry, said retail consultant Jeff Green.
Unlike so-called Class A malls, such as International Plaza, in Tampa, which are full, investors view malls like DeSoto Square as opportunities to add value with new merchants or higher rental rates.
“You can improve the tenant mix and hopefully get higher rents,” Green said. “You can densify the site by adding non-retail uses, like office or residential or a hotel. There is a lot that can be done to B malls.”
But Green does not expect a new owner to pump millions of dollars into DeSoto Square.
“Whoever buys it will maybe do more of a remodel than a redevelopment,” Green added. “It’s not the time for developers to spend a ton of money on redevelopment.”
If consummated, a sale would resolve a more than two-year conflict between Simon and its lender on the mall, the $62 million loan on which fell to “imminent monetary default” in 2010, Trepp reported.
In response, Simon offered to turn the mall over to the lenders, but the world’s largest real estate company instead retained ownership. The loan was sent to a special servicer later that year, Trepp reported.
Simon’s debt on DeSoto Square is backed by nearly 500,000 square feet of the property, and represents nearly 8 percent of the collateral of a $1 billion pool of securitized commercial mortgages managed by Merrill Lynch Mortgage Trust.
This month, Moody’s Investors Service downgraded some of the classes of the Merrill Lynch pool, in part because of the DeSoto Square loan, the pool’s largest. Moody’s contends the debt continues to be “a major source of risk” because it is “now 90+ days delinquent.”
In addition to DeSoto Square, Indianapolis-based Simon also owns the 130-store Ellenton Premium Outlets, in Manatee County, and the Port Charlotte Town Center.
Les Morris, Simon’s director of public relations, said the company would not discuss the potential sale of DeSoto Square. “It’s our policy not to comment on either acquisitions or dispositions.”
Lauren Crawford, a CBRE spokeswoman in Tampa, confirmed it is marketing DeSoto Square for sale but said details were confidential.
Simon has owned DeSoto Square during a turbulent period for malls, as online shopping has bit into sales at brick-and-mortar shopping hubs that require constant upgrade to remain viable.
But unlike many of its properties, including the Forum Shops at Caesars Palace, in Las Vegas, DeSoto Square has languished. Though it was substantially expanded in 1997, the Bradenton mall has lost tenants in recent years and struggled to maintain market share amid newer developments, including Centre Point Commons and others.
Appraised at $80.2 million eight years ago, DeSoto Square was recently revalued at $43.1 million. At the same time, the appraisal reduction amount on Simon’s outstanding loan increased from $15.6 million to $24 million this month.