Montgomery Mall in Foreclosure After $118 Million Loan Default, Judge Directs Mall to Be Sold

Tony Di Domizio•

A drone view of the 1.1-million-square-foot Montgomery Mall in Montgomery Township, taken at the early stages of the coronavirus shutdown.

Montgomery Mall is in foreclosure, and the future of the 1.1-million-square-foot Montgomery Township property is up in the air, now that an affiliate owner under Simon Property Group defaulted on a $100 million loan, according to the Philadelphia Business Journal.

Earlier this month, a Montgomery County Court of Common Pleas judge approved a mortgage foreclosure and rendered a $118.78 million judgment against Mall at Montgomery LP and directed the mall be sold to satisfy the loan, according to the article. In early June, Wilmington Trust, a trustee with Wells Fargo Commercial Mortgage, filed foreclosure documents to place the property in receivership.

However, the mall’s future may have a silver lining – it is common practice for commercial owners to “relinquish properties that they have determined no longer fit within their core portfolio,” per the article.

Simon Property Group also owns King of Prussia Mall and has undertaken “friendly foreclosure” of some of its properties, according to the article. Even mall owner PREIT came out of Chapter 11 bankruptcy recently and relinquished ownership of the Fashion District Philadelphia.

In April 2014, Royal Bank of Scotland issued a $100 million loan backed by Montgomery Mall to Simon Property Group. The loan coincided with an $8 million renovation of the mall, which eventually brought Wegmans, a new exterior aesthetic and new retailers to the property. One month later, the loan was split into two notes, one for $54 million and a second for $46 million, according to the report.

Simon stopped making loan payments June 1, 2020 after six years, per the report. It went into default in August 2020, at which time they owed $118 million.

Recent difficulties at the mall include the closure of Sears and ongoing struggles of Macy’s and JCPenney. Peripheral restaurants Chili’s and TGI Fridays closed in April 2019 and February 2019, respectively, however Wegmans continues to thrive.