This week, CRED iQ took the opportunity to highlight newly originated commercial real estate loans and calculated real-time valuations for 5 properties that have secured financing in recent months. Our data and analysis indicate these loans have relatively elevated levels of credit risk compared to others originated so far in 2021. 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.
Mi Place at Vineyard
288 units, Multifamily, Lewes, DE 19958
A $49.0 million financing package was funded by Morgan Stanley on July 13, 2021. The debt stack consisted of a $44.0 million first mortgage loan and $5.0 million in mezzanine debt. The financing package was used to pay off $39.2 million in existing debt and return $8.2 million in equity to the borrower sponsor, Jeffrey Fernbach, founder of Fernmoor Homes. The mortgage loan has a 10-year term and requires interest-only debt service payments with an interest rate of 4.37%. The mezzanine loan is coterminous with the senior mortgage and requires interest-only payments with rate of 9.25%. The mezzanine loan appears to have been sold to a third party, while the senior debt was securitized in a CMBS transaction.
The mortgage loan is secured by a leasehold interest in several multifamily and commercial condominium units located in Lewes, DE, about 8 miles inland of the Atlantic Ocean and Delaware’s coastline. The property contains 288 apartment units and an additional 21 units for commercial use. The collateral operates pursuant to a ground lease that required a payment of $992,805 in 2021. The ground lease expires in 2102 and annual payment is calculated based on formulas that account for a percentage of apartment rents for certain units and a flat cost per size for other units, with increases based on the consumer price index. The property was appraised for $64.1 million, equal to $222,569/unit, in March 2021; although CRED iQ’s analysis suggests a slightly lower value, accounting for credit risks associated with property’s leasehold ownership interest and certain elements of the condominium structure. For the full valuation report and loan-level details, click here.
|Name||Mi Place at Vineyard|
|Address||12001 Old Vine Boulevard|
Lewes, Delaware 19958
|Building Size||288 units|
|MSA||Non-Metropolitan Area – DE|
|MyQ Concluded Value||$60,450,000|
Crescent Shopping Center
118,038 sf, Neighborhood Center, Austin, TX 78752
A $24.5 million loan was originated by Morgan Stanley on April 6, 2021 to refinance existing debt on a 118,000-sf retail property located in suburban Austin, TX. The 10-year loan has an interest rate of 4.36% and is structured with a 5-year interest-only period. After June 2026, the loan will require amortizing debt service payments based on a 30-year schedule. The loan is secured by a leasehold interest in a retail property anchored by grocer 99 Ranch Market with a 37,239-sf lease that expires in July 2032, 14 months after loan maturity. No other in-line tenant accounts for more than 7,500 sf of the property’s GLA. The retail center operates under two ground leases with The Board of Regents of The University of Texas System that require a base rent of approximately $245,000 plus 7% of adjusted gross revenues. The ground leases expire in January 2029 but have 3, 10-year extensions through January 2050. The property was appraised for $38.7 million, equal to $328/sf, as of February 4, 2021, which implies a capitalization rate of 4.51% based on the originator’s underwritten net cash flow. CRED iQ’s analysis factors in additional risk related to the ground lease as well as heavy reliance on restaurant tenants occupying the in-line suites. For the full valuation report and loan-level details, click here.
|Name||Crescent Shopping Center|
|Address||6903 Airport Boulevard|
Austin, TX 78752
|Building Size||118,038 sf|
|MSA||Austin-Round Rock, TX MSA|
|MyQ Concluded Value||$33,080,000|
200 South Virginia Street
118,844 sf, CBD Office, Reno, NV 89501
Basin Street Properties secured a $15.9 million loan, originated by Bank of America, on June 2, 2021 to refinance existing debt on a 119,000-sf nine-story office building located in downtown Reno, NV. The loan was structured with an interest rate of 3.62% and has a 10-year term. The office tower was 87% occupied as of March 16, 2021 but the loan was underwritten by the originator assuming occupancy of 84%. Several large tenants at the property have lease expirations within the next 3 years. Co-working operator Regus is the largest tenant, accounting for 14% of the GLA, and has a lease that expires in September 2024. The third-largest tenant, Breadware Inc., has a lease accounting for 6% of the GLA that expires in February 2023. The property was appraised for $26.7 million, equal to $225/sf, as of April 2021, which implied a capitalization rate of 5.88% based on the originator’s underwritten net cash flow. CRED iQ’s analysis indicates moderate concern regarding the tenant roster over the loan’s term but our valuation is in line with the most recent appraisal given the assumption that the property can improve occupancy to be greater than 90%. For the full valuation report and loan-level details, click here.
|Name||200 South Virginia Street|
|Address||200 South Virginia Street|
Reni, Nevada 89501
|Building Size||118,844 sf|
|MSA||Reno-Sparks, NV MSA|
|MyQ Concluded Value||$25,250,000|
Home Depot Warehouse
310,316 sf, Warehouse, Mexico, MO 65265
A $9.95 million loan was originated by Morgan Stanley on April 15, 2021 to facilitate the acquisition of a 310,000-sf single-tenant warehouse by the borrower sponsor, Ilan Goldstein. The 10-year loan has an interest rate of 4.85% and was structured to require amortizing debt service payments based on a 30-year schedule. The collateral property is located in rural Missouri along US Route 54, across the road from Mexico Airport. The property is leased to Home Depot through October 31, 2027, which is 3 and a half years prior to loan maturity on May 1, 2031. The lease expiration of the single tenant adds a layer of binary risk to the loan; however, the property is connected to a facility also operated by Home Depot that shares a joint inventory system. The property was appraised for $14.5 million, equal to $47/sf, in November 2020, which implied a capitalization rate of 5.80% based on the originator’s underwritten net cash flow. CRED iQ’s valuation is based on a 75% probability of lease renewal by Home Depot at lease expiration. For the full valuation report and loan-level details, click here.
|Name||Home Depot Warehouse|
|Address||5701 U.S. 54 Business|
Mexico, Missouri 65265
|Building Size||310,316 sf|
|MSA||Non-Metropolitan Area – MO|
|MyQ Concluded Value||$12,620,000|
Valley Forge Corporate Center
65,716 sf, Suburban Office, Audubon, PA 19403
An $8.97 million loan was originated by KeyBank on February 9, 2021 to refinance existing debt on a 66,000-sf office property located in suburban Philadelphia, PA. The loan was structured with a partial-term interest-only period of 2 years before it converts to amortizing payments. The loan’s monthly debt service amount will increase on April 1, 2023, which coincides with the start of a period of high lease rollover risk for the property. All 5 of the office building’s largest tenants have lease expirations prior to the loan’s maturity date in March 2031. The property’s largest tenant, American Regent, accounts for 35% of the GLA and has a lease expiration on August 31, 2025. Additionally, American Regent has a lease termination option for any time after August 31, 2023, which is five months after interest-only expiration. The second-largest tenant, Assurance Software, Inc, accounts for 27% of the GLA and has a lease expiration of April 30, 2025. The property was 90% occupied at the beginning of 2021. A January 1, 2021 appraisal valued the office center at $13.8 million, equal to $210/sf, which implied a capitalization rate of 6.40% based on the originator’s underwritten NCF. However, CRED iQ’s analysis factored in potentially significant leasing costs in years 2023 through 2026. For additional information, including borrower contacts, please reach out to our team. For the full valuation report and loan-level details, click here.
|Name||Valley Forge Corporate Center|
|Address||800 Adams Avenue|
Audubon, Pennsylvania 19403
|Building Size||65,716 sf|
|MSA||Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA|
|MyQ Concluded Value||$11,920,000|
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: