Centennial, USAA Loan on Santa Ana Mall Enters Special Servicing

From left: Centennial Real Estate CEO Steven Levin, USAA Real Estate CEO Len O’Donnell, and Montgomery Street Partners co-founders Murray McCabe and Max Lamont in front of a rendering of the planned redevelopment at MainPlace mall in Santa Ana (Centennial, USAA, Montgomery Street Partners, MainPlace)

Centennial and USAA Real Estate’s loan on a 1.1 million-square-foot mall in Orange County has gone into special servicing.

The $140.5 million loan on the MainPlace mall in Santa Ana was placed into the hands of KeyCorp Real Estate Capital Markets after the partners requested an extension, according to reports from DBRS Morningstar. The loan was originally set to mature this month.

Centennial declined to comment, while USAA did not respond to a request for comment.

UBS and Bank of America provided the CMBS loan in 2012. At the time, the Santa Ana mall was owned by Australia-based shopping center firm Westfield Group. Westfield then sold the mall to a partnership between Centennial, USAA and Montgomery Street Partners.

The firms’ struggle to hold onto the property and pay off the loan comes amid Centennial redevelopment plans for the mall. The company had initially estimated it would cost $300 million to redevelop, though costs have since ballooned to $500 million.

In January, after pandemic-related delays, the company started construction on the redevelopment, which plans to construct a 309-unit apartment complex, office space and a live music entertainment venue. Centennial is still in the design stages of renovating the mall portion.

The renovation could “salvage performance” of the mall, where net cash flow has been “weak for several years,” according to DBRS Morningstar. Net cash flow at the property dropped 31 percent in 2021 from 2020, the ratings agency said in a report.

Without a major uptick in cash flow, the agency calculated a $32.2 million loss on the loan.

Occupancy has also drastically improved over the last year and a half. The mall was 100 percent occupied in December — up from 78 percent in December 2020 –– although it’s unclear whether rents have been paid in full during the pandemic.

Located about five miles from Disneyland in Anaheim, MainPlace is anchored by a Macy’s and a JCPenney — two department store firms that have closed hundreds of stores over the last two years. Other tenants at the property include Crocs, Foot Locker and Forever 21, the latter of which recently emerged from bankruptcy.

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