A joint venture led by California-based real estate investment trust Macerich Co. faces a July 1 deadline to refinance the Shops at North Bridge, the Magnificent Mile shopping center that it bought a year ago for $515 million.
Anchored by department store Nordstrom Inc., the mall at 520 N. Michigan Ave. could be the only local trophy property with a big loan coming due this year, observers say, aside from the office skyscraper at 500 W. Monroe St.
That would make Chicago unique among major cities, many of which are seeing some of their best-known buildings under pressure from the harsh market for large commercial real estate loans.
North Bridge’s owner, a venture of Santa Monica’s Macerich and the state-owned Alaska Permanent Fund Corp., could still sidestep the debt problems that have plagued other large property owners. The complex, which includes the restaurants ESPN Zone, 43 E. Ohio St. and Joe’s Stone Crab, 60 E. Grand Ave., has a strong cash flow and a relatively low level of debt of just $205 million. But the terms of any new loan would surely reflect the deep changes in the market for large commercial loans.
Macerich executives said they expect interest rates to be about 7.5% on new loans this year, compared to the current rate of 4.67% on North Bridge. And the new loan on North Bridge might be just $250 million, compared to a prediction just three months ago that the loan could reach $280 million.
Yet Macerich executives on Wednesday expressed confidence they could refinance the nearly $836 million in debts the real estate investment trust has due this year — including the REIT’s share of the North Bridge loan — during a conference call with analysts to discuss the REIT’s fourth-quarter results.
Macerich and the Alaska fund are equal partners in the complex, which includes the 680,933-square-foot mall, two parking garages totaling 1,200 stalls and 133,615 square feet of office space. As part of last year’s purchase, the joint venture assumed the current loan, which was issued in 2004.
But Macerich’s predictions about the credit markets may be optimistic, REIT research firm Green Street Realty Advisors Inc. says. The floor for interest rates for large commercial mortgages is 8%, not 7.5%, the Newport Beach, Calif.-based firm said in a report issued late Wednesday.
And additional reductions in the expected size of all the loans it must obtain this year are possible, Green Street says.
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