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Mall of America is now not behind on a $ 1.four billion mortgage

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Mall of America in Bloomington, Minnesota.

Ariana Lindquist | Bloomberg | Getty Images

Mall of America changed the terms of its $ 1.4 billion mortgage and is currently on loan after missing months of payments during the Covid crisis as stores were temporarily closed and tenants did not pay rent.

The Triple Five Group, the owner of the largest mall in the United States, started missing out on mortgage payments in April, CNBC previously reported. But it has struck a deal with lenders who expressed "strong confidence in the long-term success and viability of the Mall of America," the owners said.

The loan has been on-line since December, according to Trepp, a New York-based research firm that tracks the commercial mortgage-backed securities [CMBS] market. Beginning with the payment in December, the loan was converted to interest-free until maturity, Trepp said.

The Mall of America was closed from mid-March to June due to the pandemic. According to Trepp, retail tenant collections in the property fell to a low of 33% in April and May.

"In these unprecedented economic times, we immediately began working with our credit partners to resolve the cash flow problems caused by this loss of revenue," said Dan Jasper, vice president of communications for Mall of America, in a statement.

"We are pleased to be able to resolve the outstanding issues to the satisfaction of all parties, including a change in the loan terms," ​​he said.

The Star Tribune first reported the updated status of the loan.

"This is a trophy asset, and trophy assets are more likely to be messed up by the pandemic than B [or] C malls," Manus Clancy, senior managing director of Trepp, told CNBC.

According to the commercial real estate services company Green Street, there are still about 1,000 shopping centers in the US today. A vast majority of these malls are classified as what's called a B, C, and D rated malls, which means they have less revenue per square foot than an A rated mall. For example, an A ++ mall could generate sales of up to $ 1,000 per square foot, while a C + mall could generate around $ 320.

"When you have an A mall, see this as a vote of confidence," said Clancy. "If you have B [or] C, there is no warehouse. The lower-rated malls … won't make it."

With the reopening of restaurants, retailers, and entertainment venues in the Mall of America, traffic has picked up again – especially during the holidays, according to the Triple Five Group. The company, which also runs the mega mall American Dream in New Jersey, hopes 2021 will be a better year for business.

Nonetheless, Covid cases in the US continue to rise, and lockdowns are threatened. Covid vaccination efforts in the US, which were believed to instill consumer confidence, are also well below original estimates.

"As the months ahead continue to present unique challenges, we remain optimistic about our business and look forward to the day we can again welcome visitors from around the world," said Jasper.

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Steven Gregory