About a day after my post on the possibility of Lightstone losing Extended Stay Hotels to their banks, the Wall Street Journal wrote another story about difficulties Lightstone is having in staying current with some shopping center loans.

According to the story Lightstone:

is 60 days delinquent and in danger of “imminent default” on a $73.6 million mortgage on four malls, according to debt-rating service Fitch Inc. Lightstone told the servicer managing the mortgage — which was sliced up and sold to investors as bonds — that it intends to surrender the properties, according to Fitch….

…The malls to be forfeited — Martinsburg Mall in Martinsburg, W.Va.; Mount Berry Square Mall in Rome, Ga.; Shenango Valley Mall in Hermitage, Pa.; and Bradley Square Mall in Cleveland, Tenn. — will be managed by a receiver in the interim.

And they’ve apparently been down this route before, earlier in 2008 it defaulted on loans for malls in Burlington, NC and Macon, GA.

Now before you think, Lightstone is going under and they are having difficulties paying loans on all their properties, read into this a little more.

Lightstone – like probably every other property owner in the world – has a separate LLC or holding company set up for all of their properties, some properties may be combined, but for the most part just because one property is having difficulty paying the mortgage doesn’t mean that the entire company is having issues. Secondly, these malls are not major holdings, and they are all located in pretty much suburban/rural areas. In these areas the opening of a Wal-Mart can easily close down half the town so having vacant space in these malls is probably a real possibility due to the economic climate. Also, I havent heard a peep about issues with Lightstone’s Prime Outlets, which probably a bright spot for Lightstone because Outlet stores always do well in a down economy.

No news has come about lately in regards to the Extended Stay issues, but it hasn’t even been 30 days since the properties were “supposed” to be transferred to the banks.

Overall, I think Lightstone is still a viable company – they just have a few properties which they probably paid too much for, or have too many vacancy’s due to the economy. Hopefully if they play their cards right they will come out of this stronger than before – but probably with less properties under their belt.

andrew@alconic-inc.com