NEW YORK, March 31 (Reuters) - A Long Island mall partly owned and managed by Simon Property Group SPG.N has defaulted on a $124 million balloon mortgage payment after two of the main stores there filed for bankruptcy.

The Mall at the Source in Westbury, New York, defaulted on the payment of the principal on March 11, said a spokesman for Simon, the largest U.S. mall owner and operator.

Simon holds a 25 percent stake in the mall, and would not disclose its partners.

"Right now there's a shortage of refinancing dollars in the market place and yes, they're not going to be alone," said Thomas Fink, senior vice president of Trepp, which tracks the commercial real estate loans. The loan for the Mall at the Source had been securitized as bonds in a commercial mortgage-backed securities (CMBS) trust.

"They're not necessarily going to be forced to surrender the property," he said. "They may negotiate some type of a workout, possibly with the trust."

The default may lead to compare Simon with No. 2 U.S. mall owner General Growth Properties Inc GGP.N, which has said it may file for bankruptcy protection due to its inability to refinance its maturing debt. However, allowing the debt to default may just make business sense for Simon and its partners, Fink said.

"We have seen other operators who were recognized as being astute give up properties that they no longer found value in and just walk away from," he said.

On Tuesday, Simon completed a seven-year 7.75 percent $100 million mortgage on Penn Square Mall in Oklahoma City, Oklahoma. The interest rate on the previous $65.8 million mortgage was 7.03 percent.

On March 20, it completed a 10-year $97.5 million mortgage for Woodland Hills Mall in Tulsa, Oklahoma. The interest rate was 7.79 percent and replaced a previous 7 percent $78.6 million loan.

Earlier this month, Simon raised $1.2 billion in a debt and equity offering.

Shares of Simon rose 12.25 percent, or $3.78 to close at $34.64 Tuesday on the New York Stock Exchange.

The 521,486 square-foot mall in Westbury has been leaking tenants. Circuit City Stores Inc (CCTYQ.PK), which went out of business earlier this year, was one of its biggest tenants. At 208,000 square feet, jeweler and home goods store Fortunoff is the largest store in the mall. The company owns its building, and is is in the process of going out of business. No final date of operation has yet been set.

Department store Steve & Barry's used to be a tenant before it was liquidated.

Current tenants include Ayhan's Shish Kebab, Dave & Busters, The Cheesecake Factory Inc (CAKE.O), Famous Footwear, Foot Locker Inc (FL.N), Gap (GPS.N), Gap Kids, H&M (HMb.ST), Nordstrom Rack (JWN.N), Off 5th-Saks Fifth Avenue Outlet, Old Navy and P.F. Chang's China Bistro Inc (PFCB.O).

Executives from Simon did not return calls seeking comment. (Editing by Phil Berlowitz)