Monday, November 23, 2020

Real Estate: "These are the biggest malls landlords ready to hand over to CMBS lenders"

 From The Real Deal, November 23:

Top 10 includes properties owned by Brookfield, Simon and Westfield

As shopping centers across the country continue to struggle with a new surge in infections and lockdowns, the expiry of forbearance agreements, and secular headwinds that predated the pandemic, a growing number of mall owners are ready to hand back the keys to their lenders.

This trend has been particularly notable in the commercial mortgage-backed securities sector, where non-recourse loans are the norm and the costs of letting lenders clean up a mess are less severe.

A list of properties recently published by Trepp, based on the firm’s analysis of special servicer commentary, helps pinpoint some of the biggest CMBS loans that borrowers are ready to give up on.

Negotiations between borrowers and special servicers are a fluid process, and Trepp notes that “the data is changing everyday” and may reflect “judgment calls” and “negotiation tactics.” But a look at the largest loans on the list does still provide a sense of where mall owners are feeling the most pain.

In particular, landlords so far appear more willing to give up on malls in secondary markets. Among the top 10 properties, the largest metropolitan area represented is Philadelphia, the eighth-largest in the United States.

The country’s largest mall owners are all well-represented in the data. Brookfield Property Partners owns four of the top five; Simon Property Group has three of the top ten; and Unibail-Rodamco-Westfield accounts for two more. CBL Properties, which filed for bankruptcy this month, rounds out the top 10.

These are the 10 largest CMBS-financed properties that have a high likelihood of going back to their lenders, ranked by the total initial balance of all loan pieces. (Square footage and tenant data from Trepp does not always reflect anchors that own their own space.)

1) Park Place Mall | Tucson, AZ | $199 million | Brookfield
Size: 478,000 square feet
Top tenants: Century Theatres (73,000 square feet), Total Wine & More (27,000 square feet), H&M (19,000 square feet)
What the servicer says: “Borrower has now indicated that they will no longer support the property with additional infusions of equity. … Have retained counsel to dual-track foreclosure and loan restructure strategies.”

2) Mall St. Matthews | Louisville, KY | $187 million | Brookfield
Size: 670,000 square feet
Top tenants: JCPenney (166,000 square feet), Dave & Buster’s (65,000 square feet), Cinemark Theater (42,000 square feet)
What the servicer says: “Borrower was unable to pay off the Loan on the Maturity Date [in June]. The Special Servicer is currently in discussion with the Borrower on a potential workout and/or deed-in-lieu.”....