The ownership group behind NorthPark Center, the top-performing mall in Dallas, has secured a new $650 million commercial mortgage loan at a time of economic uncertainty in the retail industry and in a move that brings millions of dollars in funding earmarked for property upgrades.
NorthPark Management Co. and J.P. Morgan Asset Management expect to invest $71.4 million in upgrades to the upscale 1.9 million-square-foot mall over the next five years. Additional details about the spending plans were not disclosed to CoStar News.
The loan offering is expected to close on March 15. The ownership group plans to use the proceeds of the loan to refinance $487.4 million of existing debt on the property and return $138.9 million in equity to the borrower, fund a contractual leasing cost escrow and pay closing costs, according to a report from ratings agency Fitch Ratings. The two-year, floating-rate loan has three one-year extension options.
The mall houses the nation's top-performing Neiman Marcus store and has more than 30 global luxury brands, including Gucci, Prada, Tiffany & Co., Louis Vuitton and Burberry, according to Fitch Ratings. NorthPark Center brought in about $1.36 billion in sales in the 12-month period that ended in November, according to the report. The retail property was last valued by Cushman & Wakefield in December at $1.42 billion, the report stated.
NorthPark Center is "considered a Class A trophy mall in a strong market" with "strong inline sales of $1,523 per square foot through November 2023," Fitch analysts told CoStar News, setting it apart from other U.S. regional malls. NorthPark establishes a high watermark for sales per square foot in Dallas, with rivals Galleria Dallas touting sales of $1,043 per square foot and The Shops at Willow Bend pulling in $647 per square foot.
Fitch Ratings has a "deteriorating outlook" on the retail sector stemming from softened consumer spending, inflation and elevated consumer debt levels, said Adam Ott, a senior director at the agency who helped author the report on the loan offering.
"We anticipate well-located trophy malls, such as this asset, and grocery-anchored retail centers to continue to outperform the market as [consumers shift] away from spending on goods and services," Ott told CoStar News. "This shift will put further pressure on weaker malls as a whole."
Region's Top Performer
However, NorthPark is not known as a so-called weak mall. It has more than 50 works of art, including marquee sculptures, on the property. The mall doesn't have kiosks or other pop-up retail shops cluttering its enclosed corridors.
NorthPark is the Dallas area's top-performing mall with more than 200 retailers, eateries and entertainment spaces. As of November, the mall's occupancy rate was 95.7%; it has maintained an occupancy rate above 95% since the onset of the pandemic, according to Fitch.
Leasing also has remained strong. In the past three years, NorthPark's management team completed 50 new leases totaling nearly 130,000 square feet of retail space, the report stated. Another 10 tenants have either renewed or extended their leases in that period.
NorthPark has a storied history in Dallas, with the enclosed mall having been owned, in whole or in part, and operated by two generations of the Nasher-Haemisegger family beginning in 1965 when it was built on what was once cotton fields. A decade ago, Strategic Property Fund, a core U.S. real estate fund sponsored by J.P. Morgan Asset Management, acquired a 60% interest in the mall from the Nasher family in a $362 million deal.
NorthPark has six anchor tenants: Neiman Marcus, Macy's, Dillard's, Nordstrom, Eataly and a 15-screen AMC theater. These anchors account for more than $507 million in sales as of the trailing 12 months ending in November. Macy's, which is planning to close 150 stores across the nation to help generate as much as $750 million from property sales, was open for business at NorthPark as of this week.
Macy’s 250,000-square-foot space at the mall generated $204 per square foot for the 12-month period that ended in November, according to Fitch. Macy's lease expires in August 2029, the report stated.
For the Record
Barclays Commercial Mortgage Securities is the depositor on the proposed loan. The loan sellers and originators include Barclays Capital Real Estate, Wells Fargo Bank, Goldman Sachs Mortgage Co. and Morgan Stanley Mortgage Capital Holdings. NorthPark Management Co. has leased and managed the property for nearly 60 years.