This week, CRED iQ calculated real-time valuations for 5 distressed properties that have transferred to special servicing within the past 2 months, including 2 multifamily properties located in Manhattan, NY and a regional mall located in Spartanburg, SC. Distressed regional malls have been on CRED iQ’s radar for quite some time. A recent MarketWatch article cited CRED iQ for identifying at least 45 malls with $3 billion in outstanding debt that have had appraisal values reduced by 70% or more. This week’s highlight, WestGate Mall, appears to be on its way to joining that list.
The CRED iQ valuations factor in a base-case (Most Likely), a downside (significant loss of tenants), and dark scenarios (100% vacant). For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
The Branson at Fifth
59,131 sf, Mixed-Use (Retail/Multifamily), New York, NY
This $73.0 million loan transferred to special servicing for a second time on September 21, 2021, nearly 5 months after it returned to the master servicer. The loan’s initial transfer to special servicing occurred in July 2019 after the lease with the property’s retail tenant was terminated by the borrower amid legal disputes over rent obligations, as reported by The Real Deal. LNR, as special servicer, negotiated a loan modification that closed in January 2021. Salient terms of the loan modification included a 130 basis point reduction in the loan’s interest rate (to 3.0%) and an infusion of new equity in the form of an $11.0 million guaranty by the loan sponsor, Assa Properties. The loan was paid current before returning to the master servicer in April 2021 but became delinquent in September before transferring back to the special servicer in October. A deed-in-lieu of foreclosure agreement was on the table prior to the modification agreement, which included cooperation covenants in the event of a future default — potentially allowing for an expedited title transfer of the asset to LNR or an alternative workout.
The loan is secured by a 10-story, 59,131-sf mixed-use building located within the Plaza District of Manhattan. The building contains 31 multifamily units and 14,881 sf of ground-floor retail space. The ground-floor retail space was formerly occupied by luxury fashion retailer Domenico Vacca, which paid approximately $4.12 million in annual rent. At loan origination in March 2015, the retail portion of the building accounted for approximately 58% of total base rent. Domenico Vacca vacated in 2019 and the retail space was unable to permanently attract new tenants before the onset of the pandemic in 2020. The pandemic caused issues with the multifamily portion of the building, which was last reported as 67% occupied. As few as a third of the multifamily tenants may have been paying rent at certain points throughout 2020.
The property was most recently appraised on an as-is basis for $37.8 million, equal to $639/sf, in December 2020, which represented a 68% decline from the appraisal at origination. A stabilized appraisal value from the same time period came in slightly higher at $42.0 million and two Broker Opinions of Value (BOV) from late-2019 suggested an average valuation of $52.4 million. The wide range of values indicates pricing discovery is not yet complete for this property. CRED iQ calculated a componentized valuation for the property, aggregating individual values for the retail and multifamily portions of the collateral. For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
| Property Name | The Branson At Fifth |
| Address | 15 W 55th Street New York, NY 10019 |
| Outstanding Balance | $73,000,000 |
| Interest Rate | 4.30% |
| Maturity Date | 2/6/2025 |
| Most Recent Appraisal | $37,800,000 ($639/sf) |
| Most Recent Appraisal Date | 12/2/2020 |
PacStar Retail Portfolio
398,131 sf, Retail, Chicago, IL and Houston, TX
This $45.2 million loan transferred to special servicing on September 29, 2021 due to imminent default. The loan is secured by a portfolio of two retail properties located in Chicago, IL and Houston, TX. High vacancy at the Houston property, Willowbrook Court Shopping Center, caused shortfalls in net cash for the portfolio as a whole. The Yards Plaza property, located in Chicago, IL, maintains healthy occupancy of 98% but has been adversely impacted by the pandemic, which has also caused declines in net cash flow. Yards Plaza also has significant lease rollover in 2022, equal to 83% of the GLA. However, value deterioration appears to be marginal compared to Willowbrook Court Shopping Center, which has minimal prospects for stabilization without a full-scale redevelopment.
Willowbrook Court Shopping Center is a 137,650-sf retail property in Northwest Houston, adjacent to the Willowbrook Mall. The primary portion of the property is a 58,421-sf suite, accounting for 42% of the GLA, that is vacant and was formerly occupied by Toys “R” Us. The property is 29% occupied and barely generates positive net cash flow. CRED iQ anticipates leasing prospects for the property to continue to be an issue given more compelling retail locations in the immediate area, including the Commons at Willowbrook, Willowbrook Mall, and Willowbrook Plaza. For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
| Property Name | Size (sf) | Address | Allocated Loan Amount | CRED iQ Base-Case Value |
| The Yards Plaza | 260,480 | 4500 South Damen Avenue Chicago, IL 60609 | $25,216,243 | $30,490,000 ($117/sf) |
| Willowbrook Court Shopping Center | 137,650 | 17776 Tomball Parkway Houston, TX 77066 | $19,936,125 | $7,982,000 ($58/sf) |
WestGate Mall
453,544 sf, Regional Mall, Spartanburg, SC
This $30.5 million loan transferred to special servicing on October 1, 2021 due to imminent default. Westgate Mall was briefly mentioned in CRED iQ’s Delinquency Report last week as one of the highest profile loans that transferred to special servicing in October 2021. Occupancy at the collateral property has steadily declined from a pre-pandemic level of 90% to 78% as of early-2021, which has corresponded with lower net cash flow. The mall is owned by CBL Properties, which emerged from Chapter 11 bankruptcy on November 1. According to documents from CBL Properties, the mall REIT’s initial Chapter 11 filing in November 2020 constituted an event of default on the loan but a transfer to special servicing did not occur until October 2021. The next steps of workout are negotiations between CBL Properties and Rialto Capital Advisors, as special servicer.
WestGate Mall is a 950,927-sf regional mall in Spartanburg, SC, which is about 80 miles southwest of Charlotte, NC. Only a 453,544-sf portion of the mall serves as collateral for the loan and part of the collateral consists of leasehold interests that are subject to multiple ground leases. The mall is anchored, in the traditional sense, by JCPenney (93,959), Dillard’s, Belk and a vacant box that was formerly occupied by Sears; however, traffic to the area is primarily driven by a semi-adjacent, non-collateral Costco Wholesale. Recent tenant departures from WestGate Mall include Dick’s Sporting Goods (35,011 sf) and the 8-screen Regal Westgate Mall Cinema (23,360 sf). The attached movie theater was made obsolete by Regal Cinemas’ newer freestanding 16-screen theater located just north of the mall loop. The downward trend of financial performance at WestGate Mall coupled with CBL Properties’ propensity to turn over titles for underperforming assets creates the potential for a distressed acquisition by opportunistic investors. For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
| Property Name | WestGate Mall |
| Address | 205 West Blackstock Road Spartanburg, SC 29301 |
| Outstanding Balance | $30,535,547 |
| Interest Rate | 4.99% |
| Maturity Date | 7/1/2022 |
| Most Recent Appraisal | $61,500,000 ($136/sf) |
| Most Recent Appraisal Date | 5/1/2012 |
350 East 52nd Street (Eastgate House)
137 units, Multifamily, New York, NY
This $32.1 million loan transferred to special servicing on October 8, 2021 due to collateral performance issues caused by the pandemic. The borrower had trouble making timely payments in the first half of 2020 and the loan was periodically delinquent throughout 2020 and 2021. Occupancy at the property declined to 89% during 2020, compared to 99.5% in 2019.
The loan is secured by a leasehold interest in a 15-story, 137-unit multifamily property located in the Midtown East submarket of Manhattan. The property features an 80-stall parking garage and 4,170 sf of ground-floor retail space. The property operates under a ground lease with 939 First Avenue LLC that requires annual ground rent of $37,500 and expires in June 2031. At loan origination, the parking garage was leased to Icon Parking through December 2026 for approximately $588,000 per year, although revenue collected from Icon Parking was reported as significantly less in recent years. For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
| Property Name | 350 East 52nd Street |
| Address | 350 East 52nd Street New York, NY 10022 |
| Outstanding Balance | $31,200,000 |
| Interest Rate | 4.98% |
| Maturity Date | 8/6/2028 |
| Most Recent Appraisal | $62,900,000 ($459,124/unit) |
| Most Recent Appraisal Date | 6/19/2018 |
I.M. Pei Building
169,494 sf, Office, Wilmington, DE
This $14.6 million loan transferred to special servicing on September 21, 2021 due to the impending departure of the collateral property’s largest tenant, M&T Bank. M&T Bank has a lease that expires at year-end 2021 and accounts for 10% of the collateral’s GLA. The tenant will vacate at lease expiration and the borrower has requested a modification, leveraging its willingness to contribute additional capital for repairs and re-tenanting. The loan is secured by the I.M. Pei Building, a 23-story office tower located in the CBD of Wilmington, DE. Occupancy at the property was 88% as of June 2021, but will decline to 78% occupancy following the departure of M&T Bank. For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
| Property Name | I.M. Pei Building |
| Address | 1105 Market Street Wilmington, DE 19801 |
| Outstanding Balance | $14,640,130 |
| Interest Rate | 4.92% |
| Maturity Date | 10/6/2027 |
| Most Recent Appraisal | $21,300,000 ($126/sf) |
| Most Recent Appraisal Date | 7/19/2017 |
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. For full access to our loan database and valuation platform, sign up for a free trial below:
