Creditors of the struggling Mall of Berlin are looking to sell about €550 million ($615 million) of debt they had extended to the sprawling shopping complex in the heart of the German capital, while its owners are also trying to get a refinancing over the line.
Lenders including Germany’s largest occupational pension fund Bayerische Versorgungskammer are collecting bids across the debt structure, according to people familiar with the matter. There is no guarantee that the debt will be sold in the end, or which portion, and other options could still be pursued, the people said, asking for anonymity to discuss non-public information.
The loan sales process is happening in parallel to a separate refinancing process being spearheaded by the co-owner of the mall, HGHI Holding GmbH. “The Mall of Berlin is in final stages of negotiations on a refinancing led by UniCredit,” managing director Harald Huth told Bloomberg News.
The Mall of Berlin is an emblem for the struggles facing bricks-and-mortar shopping destinations, with many locations struggling after the Covid-19 lockdowns accelerated the shift to online retailers. Located on the site of the destroyed Wertheim department store, it is owned by a joint venture between Arab Investments Ltd and Huth, who has been dubbed by local media as the ‘King of Berlin Malls.’
The pair bought it in 2011, when it was the largest undeveloped site in central Berlin, part of the Potsdamer Platz area where the Berlin wall once divided Germany’s largest city. It has over 76,000 square meters (818,060 square feet) of retail space and 30,000 square meters of apartments, as well as a hotel.
That size may make it harder to swallow for potential debt buyers, which in these situations often include opportunistic funds that plan to take over the underlying property.
Investor concerns include the feasibility of selling the property on after the business has been turned around, given the constrained market for such large retail properties, the people said. The apartments have struggled to reach full occupancy because of their cost and location in one of the busiest and most touristy parts of the city, the people added.
Spokespeople for BVK and UniCredit SpA declined to comment. Arab Investments didn’t respond to requests for comment by email and phone.
Read More: Mall of Berlin’s Strained Finances Force Lenders Into New Talks
Selling debt in stressed situations is usually avoided by lenders as potential buyers often demand hefty discounts. Negotiations over the Mall of Berlin’s debt load have been going on for months. The financing has been in place since 2014, and is split into three ranks.
BVK, which oversees €122 billion in retirement assets for some 2.8 million individuals, has seen a number of high-profile real estate investments sour, including in the US, where losses at a fund through which it invested are estimated to reach as much as $1 billion.