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Simon’s Rushmore Mall loan sent to servicer, Fitch says

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A loan on a South Dakota shopping center owned by Simon Property Group Inc., the biggest U.S. real estate investment trust, was sent to a special servicer because default is imminent, Fitch Ratings said.

The balance of the debt on the Rushmore Mall in Rapid City is $94 million, Fitch said Tuesday. The 830,000-square-foot center was built in 1978 and renovated in 1993, data compiled by Bloomberg show.

The mall plunged in value after the 2008 financial crisis. It had an appraised value of $117.5 million in 2006 as the commercial property market was peaking and was appraised at $45 million in September 2011, according to Bloomberg data. Sears Holdings Corp. and J.C. Penney Co. are among the property’s anchor tenants, according to Simon’s website.

But Penny, which occupies 89,000 square feet, has threatened to leave the mall unless it receives a new 104,000-square-foot space at the mall. Simon has denied that request.

Simon’s revenue has been rising as demand for space in regional malls climbs. Revenue jumped 14 percent in the third quarter from a year earlier, the Indianapolis-based company reported.

Les Morris, a Simon spokesman, didn’t immediately return a voice mail or e-mail seeking comment on the Fitch listing.

Special servicers negotiate with landlords on behalf of bond investors. The Rushmore Mall loan is packaged within Banc of America Commercial Mortgage Inc. 2006-3, a commercial mortgage-backed security.

Simon owns or has stakes in 331 properties in North America and Asia.

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  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

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