Four Loans to Watch – Retail & Office Sales, Write Downs, Modifications
Midway through 2021, economic data continues to show a “slow” recovery from the pandemic. Vaccinations have reached 70% in large states like New York and California, but are unlikely to be affected across the country by The 4th of July.Meanwhile, the data of Trepp Anonymous Loan Level Deposit (T-ALLR)shows that the first quarter bank loan portfolios continued to see lower occupancy rates and that loans are viewed as “criticized”. On the recovery front this month, the TSA recorded its most travelers since March 2020, a positive sign for airlines and hotels, as Trepp CMBS delinquency and special service rates continued to decline – standing at 6.16% and 8.56%, respectively.
See below for coverage of the latest loans to watch in June.
Jefferson Mall (Louisville, Kentucky)
June remittance data revealed the value of collateral behind $ 59.9 million Jefferson Mallloan was sharply reduced. The past year has been tumultuous for both the loan and the building owner, CBL. Last November we had some happier news to report on the loan. At the time, we noted that CBL disclosed that it had closed a loan modification extending the maturity date from June 2022 to June 2026 in its third quarter earnings call.
Only a few months later, special memos indicated that the borrower was back looking for a subsequent change. The loan was returned to the special service due to a current non-monetary default according to recent disbursement notes.
The warranty contains approximately 280,000 square feet of retail space in a Louisville, KY shopping center. The entire mall encompasses nearly a million square feet. The unsecured stores during the securitization included Dillard’s, JCPenney, Macy’s, Sears and Toys ‘R’ Us. Only Dillard and JCPenney remain open on these lists of names. The loan represents 9.73% of the remaining collateral behind JPMCC 2012-CBX. This agreement is part of CMBX 6.
Upon securitization, the collateral was valued at $ 101.7 million. This month, the value was lowered to $ 34.7 million. The loan posted a DSCR (NCF) of 1.73x for 2020 when the occupancy rate was 91%.
LA County Office Portfolio (Agoura Hills, CA)
According to new watchlist notes for $ 69 million LA County Office Portfolio,the second largest tenant in the guarantee “no longer occupies a significant part of its rented space”. The loan is backed by five office buildings totaling 346,786 square feet in the greater Los Angeles area of Agoura Hills.
This month’s watchlist notes indicate that Cydcor LLC is no longer occupying part of its space. Cydcor owns 12.4% of the total area of the portfolio and represents 14.2% of the base rent.
Data from the service agent indicates the company’s lease runs until 2025, but a prospectus footnote indicated that Cydcor could terminate in 2021 for a termination fee of $ 800,000.
Another footnote to the prospectus read “CYDCOR [was] during discussions with borrowers regarding rent relief ”at the time of loan securitization. A similar note applied to the fourth largest tenant.
The loan represents 9.51% of the guarantee JPMDB 2020-COR7.This agreement is part of CMBX 14.
Art Van Portfolio (Warren, MI)
In February 2020, we alerted TreppWire readers that Art Van Furniture was considering filing for bankruptcy and was continuing to sell the business. The bankruptcy filing took place a month later. Some stores were then bought by Love’s Furniture, which itself filed for bankruptcy less than a year later.
In our first TreppWire report on the Art Van bankruptcy, we highlighted the (now) $ 66.6 million Art Van Portfolio loan that is backed by five properties in Michigan. The portfolio contained just over 1.4 million square feet spread over two warehouses and three commercial properties. Art Van was the sole tenant of the securitization, with some of the leases passed to Love over time.
This loan is now auctioned through the RealINSIGHT Market. Auction opens on July 19. The collateral was valued at $ 100.85 million in 2017 and no valuation has been updated since.
The loan is spread over three CMBS transactions: a tranche of $ 28.6 million represents 3.27% of UBSCM 2017-C1,a $ 19.9 millionroom represents 3.21% of CFCRE 2017-C8 (part of CMBX 11), and $ 18.2 millionpart represents 2.92% of WFCM 2017-RB1.
The last loan payment was made in October 2020.
The loan does not mature until 2027, so a sale of the loan would have a negative impact on the interest-only bonds of these transactions and the AAA prepayment bonds being marked at premiums.
600 Broadway (New York, NY)
Remittance data for the $ 75.3 million 600 Broadwayloan indicates that there has been a significant reduction in the loan and the balance may go down as well. Only two of the three loans were forgiven for June, and both of these loans saw their balances drop by more than 50%.
The property is a 77,280 square foot commercial asset on the corner of Broadway and West Houston Street in the Soho neighborhood of New York. We have written about this loan several times in the past.
The loan consists of three loan pieces in separate transactions from 2016, the largest of which is $ 46.3 million coin which represents 6.53% of CGCMT 2016-P3.This balance is still as of May. There is also $ 16.6 million slicewhich represents 2.28% of DBJPM 2016-C1.A $ 15.3 million coin is 2.03% ofCGCMT 2016-C37 and received a payout of $ 15.3 million this month.
In early 2019, we noted that Abercrombie & Fitch announced the closure of its Manhattan flagship store Hollister, which was part of the loan guarantee. In January 2020, the loan was sent to the special service.
Around the same time – early 2020 – our friends at KBRA helped fill in some of the points, noting that the borrower had requested to terminate the lease for 24-Hour Fitness for approximately 30,000 square feet. The gym operator sublet the space and the borrower has a potential replacement tenant, according to KBRA. The 24-hour Fitness lease was scheduled to last until the end of 2023 and represents 39.2% of the space.
Special memos in the summer of 2020 indicated that the property was entirely vacant as all tenants in the property had gone dark.
At the end of last year, we noticed that Target had signed up for 27,000 square feet at the location. Look for a larger reduction for this loan once the CGCMT 2016-P3resets.
For more information on CMBS loans to watch, contact us at[email protected]
Originally posted in TreppWire, which is distributed each morning in the form of an electronic newsletter for customers. TreppWire allows readers to stay up to date on market activity while providing a competitive advantage over others. TreppWire leverages market expertise and Trepp’s proprietary data sets to deliver daily market commentary, trend analysis, research and breaking news to its customers.
Editor’s Note: The information referenced in this blog post regarding CMBS loans, transactions and properties comes from the corresponding monthly installment reports published by the CMBS trust. The names of the loans are given by the issuer during the securitization and may not indicate the affiliation of the borrower or the owner. In many of the above scenarios, the borrower may be in the process of securing additional financing or approving term extension / modification options and / or pursuing recovery strategies with affiliated parties.
The information provided is based on information generally available to the public from sources believed to be reliable..