A great article was published on MarketWatch this week by @JoyWiltermuth profiling buyers of distressed regional malls across the country. For those of our followers that missed the story, here is a link to the article. CRED iQ had the pleasure of providing data for regional malls that have become distressed to the level that the owners have or are willing to transition titles to the properties back to lenders. This group of assets includes malls that have become REO since the pandemic, malls that have entered receivership, malls in negotiation for deed-in-lieu of foreclosure agreements, and malls where foreclosure is likely in the near term.
Here is a list of the 5 largest malls that have become REO since the onset of the pandemic:
REO Title Acquisitions Since April 2020 – Regional Malls
Property Name
Location
Outstanding Debt
Town Center at Cobb
Kennesaw, GA
$173,449,158
Florence Mall
Florence, KY
$89,404,415
Southland Mall
Cutler Bay, FL
$65,159,858
Newgate Mall
Ogden, UT
$58,000,000
Oakdale Mall
Johnson City, NY
$47,464,494
More additions to the list are likely to occur over the next 12 to 18 months as foreclosures and deed-in-lieu agreements continue to be consummated. Here is a sample list of some of the largest loans that are on the path to foreclosure and subsequent title transfer:
Likely Near Term REO Title Transfers – Regional Malls
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.
Subject Property
Name
Mi Place at Vineyard
Address
12001 Old Vine Boulevard Lewes, Delaware 19958
Type
Multifamily
Subtype
Garden
Building Size
288 units
Year Built
2012
Submarket
Lewes
County
Sussex County
MSA
Non-Metropolitan Area – DE
Origination Date
07/13/2021
Valuation
Appraisal Value
$64,100,000
Appraisal Date
03/16/2021
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.
Subject Property
Name
Crescent Shopping Center
Address
6903 Airport Boulevard Austin, TX 78752
Type
Retail
Subtype
Anchored
Building Size
118,038 sf
Year Built
1964
Submarket
Highland
County
Travis County
MSA
Austin-Round Rock, TX MSA
Origination Date
04/06/2021
Valuation
Appraisal Value
$38,700,000
Appraisal Date
02/04/2021
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.
Subject Property
Name
200 South Virginia Street
Address
200 South Virginia Street Reni, Nevada 89501
Type
Office
Subtype
CBD
Building Size
118,844 sf
Year Built
1982
Submarket
Downtown
County
Washoe County
MSA
Reno-Sparks, NV MSA
Origination Date
06/02/2021
Valuation
Appraisal Value
$26,700,000
Appraisal Date
04/06/2021
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.
Subject Property
Name
Home Depot Warehouse
Address
5701 U.S. 54 Business Mexico, Missouri 65265
Type
Industrial
Subtype
Warehouse
Building Size
310,316 sf
Year Built
1985
Submarket
Mexico
County
Audrain County
MSA
Non-Metropolitan Area – MO
Origination Date
04/15/2021
Valuation
Appraisal Value
$14,500,000
Appraisal Date
11/20/2020
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.
Subject Property
Name
Valley Forge Corporate Center
Address
800 Adams Avenue Audubon, Pennsylvania 19403
Type
Office
Subtype
Suburban
Building Size
65,716 sf
Year Built
2008
Submarket
Norristown
County
Montgomery County
MSA
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA
Origination Date
02/09/2021
Valuation
Appraisal Value
$13,800,000
Appraisal Date
01/01/2021
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:
This week, CRED iQ continued to focus on distressed commercial real estate collateral located in Cleveland, OH and calculated real-time valuations for 5 properties within the MSA that have recently transferred to special servicing, including the tallest building in the state of Ohio. The August 2021 CRED DQ Report highlighted Cleveland as a market with one of the three-highest delinquency rates in the US, which opened the opportunity to take a deeper dive into a few of the assets behind the elevated level of distress. 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.
Key Center Cleveland
(Key Tower/Marriott Cleveland Downtown/Key Center Parking Garage)
1.4 million sf/400 keys/985 spaces, Mixed-Use (Office/Hotel/Parking), Cleveland, OH 44114
This $209.5 million loan transferred to special servicing in October 2020 due to imminent monetary default, which the borrower attributed to adverse impacts from COVID-19. The loan is secured by fee interests in a 1.4 million-sf Class-A office tower (Key Tower) and a 400-key hotel (Marriott Cleveland Downtown) as well a leasehold interest in a 985-space subterranean parking garage located under the adjacent Memorial Fountain (Key Center Parking Garage). All three structures are located in the CBD of Cleveland, on the northern corner of Cleveland Public square.
On an aggregate basis, net cash flow for the properties declined from $28.9 million in 2019 to $21.0 million in 2020, resulting in a DSCR of 1.32. However, the DSCR is below breakeven when factoring in $42.5 million of mezzanine debt, which was funded by Apollo Commercial Real Estate Finance. The decline in net cash flow during 2020 was primarily caused by a loss of revenue from the hotel and parking components of the collateral during the early stages of the pandemic. Base rents from the office component remained stable in 2020; although, servicer commentary noted the building’s namesake tenant, Key Bank, contracted its space by about 42,000 sf. Key Bank now leases about 18% of the property’s GLA and still has two more contraction options in the coming years, totaling about 60,000 sf.
Despite the distressed nature of the loan, the office tower remains well-positioned in the submarket. Reserves for the loan, including funds for leasing, are relatively healthy, totaling $10.5 million and CRED iQ has observed other tenants in the submarket vacate inferior properties in favor of Key Tower. Just last week, our WAR Report highlighted law firm Littler Mendelson vacating 1100 Superior Avenue to move into Key Tower. The borrower appears to be requesting temporary payment relief, as evidenced by servicer commentary. For the full valuation report and loan-level details, click here.
DoubleTree by Hilton – Cleveland OH
379 keys, Full-Service Hotel, Cleveland, OH 44114
This $26.6 million loan transferred to special servicing in October 2019 due to monetary default. The loan is secured by a full-service hotel that operates as a DoubleTree by Hilton via a franchise agreement that expires in November 2026. As a pre-pandemic transfer, the property’s operational struggles can be traced back to competition from newer, higher quality lodging projects in the CBD submarket, including the 600-key Hilton Cleveland Downtown. The borrower appears to have been cooperating with the placement of a receiver and attempted transition of the title to Greystone, the loan’s special servicer. However, a foreclosure moratorium in 2020 and ongoing labor issues with hotel employees have delayed a title transfer, which may make a note sale more plausible as a workout solution. For the full valuation report and loan-level details, click here.
DoubleTree Beachwood
404 keys, Full-Service Hotel, Beachwood, OH 44122
This distressed hotel opportunity has outstanding debt of $24.1 million and has been with the special servicer since April 2019. The property is a 404-key full-service hotel, and similar to the property highlighted above, operates as a DoubleTree by Hilton via a franchise agreement that expires in 2027. Torchlight, as special servicer, acquired title to the property on December 4, 2020 via a deed-in-lieu of foreclosure agreement. Our analysis indicates that the lodging facility is configured with an excessive quantity of rooms for its market, which has been a main driver behind the property’s operational struggles as well as an onerous franchise fee that has been reported to be over $1.1 million. Updated commentary indicates the property is actively being marketed for sale. For the full valuation report and loan-level details, click here.
This $22.7 million loan transferred to special servicing on June 1, 2020 due to imminent monetary default. The loan is secured by a mixed-use property that includes a 150-key hotel, 33,166 sf of retail space and a 174-space parking lot. The hotel operates under a franchise agreement with Sheraton’s Aloft brand that expires in June 2033. This Phase I property is part of a larger multi-phase development that includes other distressed properties as well. Phase II of the development, which included multifamily and retail uses, was also distressed in early 2021, but the mortgage loan secured by Phase II was ultimately purchased by a subordinate debtholder.
The Phase I property began having issues in 2017 when the largest retail tenant, EB Fitness, vacated its 16,071-sf suite. A new fitness tenant, Browns Fit, signed a lease to occupy the vacant space in 2019. Shortly after, the effects of COVID-19 began to take its toll on the property, especially the hotel component. The latest servicer commentary indicated Rialto, as special servicer, is in workout negotiations with the borrower. The viability of the hotel component is a key factor for the property because it has a deed restriction related to past environmental issues that prohibits residential use. For the full valuation report and loan-level details, click here.
The IMG Building
232,908 sf, Office, Cleveland, OH 44114
This $16.2 million loan transferred to special servicing on March 5, 2019 due to delinquency. The loan is secured by a Class-C office property, located in the shadow of One Cleveland Center within the CBD of Cleveland. The borrower has not provided updated occupancy or financial figures since loan origination; however, CRED iQ estimates current occupancy to be approximately 68%. According to Crain’s Cleveland Business, the property’s second largest tenant, MAI Capital Management, is vacating in favor of a suburban office location. Additionally, the third-largest tenant Bellwether Enterprise moved across the street to the aforementioned One Cleveland Center. The two tenants accounted for 20% of the property’s GLA. The servicer has filed for foreclosure and the borrower is contesting those actions. For the full valuation report and loan-level details, click here.
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:
The overall delinquency rate declined this month and continued a streak of downward movement since its peak in June 2020. The month-over-month improvement compared to the prior period is attributed to the lodging sector. Hotel properties continue to be a primary source distressed commercial real estate with the highest overall delinquency rate by property type; however, delinquencies in the sector continue to be resolved throughout the summer months, in turn bringing down the overall delinquency rate. The Cleveland, OH lodging market is an example month-over-month delinquency improvement, second-highest this month, despite nearly half of its lodging inventory still considered distressed. Markets with the highest month-over-month increases in delinquency for lodging properties included Birmingham, AL, Baltimore, MD and Los Angeles, CA. Implications from emerging concerns about the Delta variant of COVID-19 remain to be seen as select markets revert back to certain restrictions that may adversely impact commercial real estate collateral.
CRED iQ monitors market performance for nearly 400 MSAs across the United States. Below is a summary of the default rates for the 50 largest metros segmented by property type. For these 50 MSAs, the highest delinquency rate was in Minneapolis, followed by Louisville and Cleveland. The San Francisco market saw the largest month-over-month increase in delinquency, although the spike was isolated to the 3,221-unit Parkmerced multifamily community. Accounting for the outlier, Louisville had the next highest increase in delinquency compared to the prior month. Sacramento, CA and Allentown, PA both reported the lowest delinquency rate among the Top 50 MSAs. The most significant month over-month decline in delinquency was in the Tucson market, which has seen volatile fluctuations in delinquency rates throughout the year.
By property type, the hotel and retail sectors remain the largest contributors to the delinquency percentages for the majority of these statistical areas. Loans backed by self-storage, multifamily, and industrial facilities posted the lowest delinquency rates for most of these markets.
Delinquent & Specially Serviced Loans by MSA and Property Type
This week, CRED iQ calculated real-time valuations for 5 distressed properties that have recently transferred to special servicing, including two regional malls and a CBD office building in Cleveland, OH. For those interested in the affordable housing sector for multifamily properties, we highlighted two assets making negative headlines in suburban Indianapolis for neglect and mismanagement. 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.
Dayton Mall
778,487 sf, Regional Mall, Dayton, OH 45459
This $76.9 million loan transferred to special servicing on June 30, 2021 with non-monetary default cited as the reason. However, the transfer to special servicing was likely prompted by the June 13, 2021 bankruptcy of the borrower sponsor, Washington Prime Group. Prior to the owner’s bankruptcy, the mall’s occupancy and NCF had been declining significantly. Washington Prime Group identified the Dayton Mall as a highly levered asset on March 31, 2021 and re-classified the mall as a non-core part of its portfolio, making it a candidate for a discounted payoff or deed-in-lieu of foreclosure agreement.
The mall features two vacant anchor pads, consisting of a 203,548-sf former Elder-Beerman and a 185,790-sf former Sears, as well as two operational anchors, consisting of a 268,943-sf Macy’s and a 178,686-sf JCPenney. Only the JCPenney anchor pad is collateral for the mortgage loan. NCF for 2020 totaled $4.5 million with a DSCR of 0.90, and we don’t expect performance to materially improve in 2021. Midland Loan Services, as special servicer, has not commented on a workout strategy as Washington Prime Group’s bankruptcy proceedings will need to be resolved first. For the full valuation report and loan-level details, click here.
Brunswick Square
292,685 sf, Regional Mall, East Brunswick, NJ 08816
This $67.3 million loan transferred to special servicing on June 29, 2021 due to imminent monetary default at the borrower’s request. This marks the second transfer to special servicing within the past year as the loan last returned to the master servicer in December 2020 without any modifications. The loan is secured by 292,685 sf of in-line space at the Brunswick Square Mall. The mall is anchored by Macy’s and JCPenney but both tenants own their parcels and improvements.
Brunswick Square shares the same borrower sponsor as the Dayton Mall, discussed above, and similarly has been identified as a highly levered asset and non-core property. Rialto, as special servicer, is evaluating workout options which may revisit modification proposals. The in-line space collateral was 88% occupied as of December 2020 and has steadily declined from 99% occupancy at origination in 2014. For the full valuation report and loan-level details, click here.
1100 Superior Avenue
576,766 sf, CBD Office, Cleveland, OH 44114
This $48.0 million loan transferred to special servicing on June 28, 2021, due to delinquency. The loan is secured by a 22-story office tower located in the CBD of Cleveland, OH. The office building was 87% occupied as of March 2021 but was further impacted by the recent departure of its third-largest tenant, law firm Littler Mendelson. Littler Mendelson vacated 44,667 sf of space, accounting for 8% of GLA, at lease expiration in April 2021 in favor of Key Tower, which overlooks Cleveland Public Square. CRED iQ’s estimated occupancy for the property is 79%. The loan has been paid through April 6, 2021 and is over 60 days delinquent. LNR, as special servicer, has not commented on a workout solution for the loan. For the full valuation report and loan-level details, click here.
Lakeside Pointe At Nora & Fox Club Apartments
924 units, Multifamily, Indianapolis, IN 46240
This $32.0 million loan transferred to special servicing on June 29, 2021 due to imminent non-monetary default. The loan is secured by two multifamily properties with affordable housing restrictions that are located in suburban Indianapolis. According to an article from Fox59 News out of Indianapolis, the transfer to special servicing may be related to a lawsuit filed by the Indiana Attorney General’s Office against the borrower, which has a non-profit 501(c)(3) classification. The borrower’s non-profit status allows it to maintain an expemption from paying property taxes; although the exemption was recently revoked due to the issues outlined in the lawsuit.
The lawsuit alleges mismanagement and failure to maintain healthy living conditions for the properties’ residents. The Attorney General has requested a receiver be appointed to both properties. As recently as two weeks ago, the Lake Pointe at Nora property was damaged in a major fire that impacted the main leasing office and clubhouse and prior fires at the properties have resulted in downed units. Other items of concern included severe deferred maintenance, $1.2 million in outstanding water and sewer bills, mold, and broken fixtures throughout the premises. Aggregate NCF for both properties during 2020 was $1.2 million, which resulted in a DSCR of 0.61; however, property taxes were not included in those figures and could potentially total over $400,000. For the full valuation report and loan-level details, click here for Lakeside Pointe At Nora and here for Fox Club Apartments.
West Side Mall
420,434 sf, Power Center, Edwardsville, PA 18704
This $23.8 million loan transferred to special servicing on June 29, 2021 due to imminent monetary default at the borrower’s request. The loan is secured by a power center located in the Scranton–Wilkes-Barre MSA and the borrowing entity is encumbered by $2.0 million in mezzanine debt, which was held by Ladder Capital at origination. The property is anchored by a Lowe’s Home Improvement and a Price Chopper. Lowe’s owns its improvements and operates via a ground lease that expires in January 2027. Occupancy at the property was last reported to be 71% as of September 2020. Full-year financial statements were not reported for 2020 but the loan had a below breakeven DSCR in 2019 and 2018. Rialto, as special servicer, is in the process of initiating communication with the borrower. For the full valuation report and loan-level details, click here.
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:
This week, CRED iQ calculated real-time valuations for 5 retail properties that have had title transfers and are now REO. Highlighted properties include the Montgomery Mall in North Wales, PA, which was featured in a Philadelphia Business Journal article that cited CRED iQ analysis. 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.
Montgomery Mall
1.1 million sf, Regional Mall, North Wales, PA 19454
This property, which has outstanding debt of $100.0 million, has been with the special servicer since June 16, 2020, and title to the mall transferred to LNR on July 12, 2021, according to the Philadelphia Business Journal. Prior to the mall becoming REO, the previous owner, Simon Property Group, had been discussing potential loan modification solutions, but foreclosure was filed. Two anchor pads at the mall are ground leased to Macy’s and a Wegmans supermarket while a third is leased to JCPenney. Another anchor pad was ground leased to Sears, but the location closed in 2020. Servicer-reported occupancy for the mall of 87% is a bit misleading considering the Sears closure and our estimation that in-line occupancy is trending sub-60%. Likewise, the most recent appraisal for the mall was $61.0 million; although CRED-iQ’s Base-Case Valuation calculates a lower figure. Next steps are for the property are stabilization or placement on the market to be sold. For the full valuation report and loan-level details, click here.
North Oaks
448,740 sf, Power Center, Houston, TX 77069
This property, which has outstanding debt of $23.7 million, has been with the special servicer since June 18, 2020, and title to the property transferred to LNR on June 1, 2021. The retail center is located in northwest Houston and is anchored by a Hobby Lobby with a lease, accounting for 12.5% of the GLA, that is scheduled to expire on August 31, 2021. The owner of the former loan sponsor, Nate Paul of World Class Capital Group, has been embattled in bankruptcies and legal proceedings; however, the North Oaks center has also struggled with occupancy, which was last reported to be 72% at the end of 2019. Notably, TJ Maxx vacated in 2019 in favor of a new location at a neighboring shopping center. Special servicer commentary stated the property is not yet listed for sale. For the full valuation report and loan-level details, click here.
Portsmouth Station Shopping Center
147,104 sf, Strip Center, Manassas, VA 20110
This property, which has outstanding debt of $18.5 million, has been with the special servicer since June 18, 2020, and became REO just over a year later on June 25, 2021. The retail center is located in northern Virginia, approximately 50 miles west of Washington, DC and is anchored by a Regency Furniture store with a lease, accounting for 31% of the GLA, that is scheduled to expire in 2030. Regency Furniture backfilled a former Toys “R” Us location, which closed following the company’s bankruptcy and liquidation. The property is 78% occupied and special servicer commentary stated the property is not yet listed for sale. For the full valuation report and loan-level details, click here.
Brettwood Village Shopping Center
205,180 sf, Retail Center, Decatur, IL 62526
This property, which has outstanding debt of $9.2 million, has been with the special servicer since May 21, 2020, and a deed-in-lieu of foreclosure agreement was finalized on June 2, 2021. The retail property is located in central Illinois and is anchored by a Kroger supermarket, accounting for 28% of the GLA, with a lease that is scheduled to expire in April 2026. The property is 64% occupied following the departure of several tenants over the past few years, including TJ Maxx, American Furniture Group, Dollar General, and Payless ShoeSource. Special servicer commentary stated the property may be ready for sale by May 2022. For the full valuation report and loan-level details, click here.
Market Square at Montrose
166,373 sf, Big Box Retail, Fairlawn, OH 44333
This property, which has outstanding debt of $5.4 million, has been with the special servicer since June 9, 2020, and title of the property transferred to LNR on June 30, 2021. The property consists of a leasehold interest in a big-box retail building located outside of Akron, OH. Ground rent for the property costs about $500,000 per year. A 42% portion of the building was occupied by Levin Furniture through December 2020 when the tenant vacated after bankruptcy issues related to affiliate Art Van Furniture. The other 58% portion of the building is leased to JCPenney through October 2027, which is coincidentally coterminous with the property’s ground lease. CRED-iQ’s Base-Case Valuation assumes the departure of JCPenney at lease expiration and the reversion of the improvements to the ground lessor, resulting in little to no residual value for the property, unless the ground lease can be re-negotiated. For the full valuation report and loan-level details, click here.
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:
This week, CRED iQ calculated real-time valuations for 5 properties with exposure to major tenants with lease expirations in 2021. Featured leases include large blocks of office space that were vacated by Bank of America, in the Chicago market, and Wells Fargo, in the Charlotte market. 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.
301 South College Street
One Wells Fargo Center
988,646 sf, CBD Office, Charlotte, NC 28202
We first brought attention to the largest tenant’s lease expiration at this property in our April 12thLinkedIn post. As a refresher, Wells Fargo is vacating 501,269 sf of space on December 31st at One Wells Fargo Center, a Class-A office tower located in the CBD of Charlotte. The tenant is reducing its footprint at the property but will retain 185,565 sf of space with a lease that expires in 2032. Among the spaces that will be available are the entire floor plates for stories 7 through 20. Fee and leasehold interests in the office tower secure a $165.3 million loan that has been on the servicer’s watchlist since January 2021. CRED iQ’s estimated occupancy for the property is 48%; although, the loan has a healthy reserve balance of $16.6 million and a cash trap is in place, equal to $30 per square foot of vacated space, that should help leasing efforts. For the full valuation report and loan-level details, click here.
135 South Lasalle
1.3 million sf, CBD Office, Chicago, IL 60603
Bank of America is vacating 788,499 sf of space on July 31st at 135 South LaSalle, a Class-A office tower located in the Central Loop submarket of Chicago. The property secures a $100.0 million mortgage loan that has been on the servicer’s watchlist since August 2020. July servicer commentary finally confirmed Bank of America’s departure, which was widely speculated over the prior 12 months. CRED iQ’s estimated occupancy for the property is 24%. The loan remains current in payment and has an anticipated repayment date on May 1, 2025 with a final maturity date on May 1, 2030. For the full valuation report and loan-level details, click here.
Cool Springs Commons
301,697 sf, Suburban Office, Brentwood, TN 37027
Community Health Systems (CHS), a healthcare operator and provider based in Tennessee, is the largest tenant at Cool Springs Commons, accounting for 66% of the GLA with a 199,915-sf lease that expired in January 2021. Cool Springs Commons is a Class-B office property located in suburban Nashville. Commentary from the servicer stated that CHS has already relocated many of its employees, which indicates downsizing by the tenant at best. A second tenant, Comprehensive Health Management, has a 17,789-sf lease that expires on November 30, 2011. CRED iQ’s estimated occupancy for the property is 31%, assuming that CHS completely vacates instead of downsizing. For the full valuation report and loan-level details, click here.
Owasso Market
351,370 sf, Power Center, Owasso, OK 74055
The Owasso Market power center in Owasso, OK, which is shadow-anchored by a Walmart Supercenter, continues to work through lease rollover issues. The property’s largest tenant, Lowe’s Home Improvement, has a 191,940-sf ground lease, accounting for 55% of the GLA, that is set to expire on September 30, 2021, but has six, five-year extension options remaining. The second-largest tenant, Kohl’s, had an 86,584-sf lease, accounting for 25% of the GLA, that expired in January 2021 but the retailer signed a five-year renewal through January 2026. The third-largest tenant, Office Depot, has a 20,000-sf lease, accounting for 6% of the GLA, that is scheduled to expire on December 31, 2021 and has a fairly generous list of termination options. The loan secures an $18.8 million loan that is scheduled to mature in August 2028. CRED iQ’s estimated occupancy is 93%, assuming Lowe’s Home Improvement renews and Office Depot vacates. For the full valuation report and loan-level details, click here.
10310 Harwin Drive
311,486 sf, Industrial, Houston, TX 77036
Both tenants at this gated warehouse facility, located in southwest Houston, have lease expirations in 2021. GRM, a document management company, has a 173,095-sf lease, accounting for 56% of the GLA, that is scheduled to expire on October 31, 2021. The remaining 44% of GLA is occupied by Iron Mountain through a 138,391-sf lease that expired on June 30, 2021. The warehouse is part of a two-property portfolio that secures a $15.9 million loan, which is scheduled to mature on February 6, 2022. There have been no leasing updates from the borrower based on July’s servicer commentary; however, GRM is affiliated with the borrower sponsor. Based on CRED iQ’s Base-Case valuation, leverage for the property is not a significant concern; although the lease rollover issues may require some type of bridge financing. For the full valuation report and loan-level details, click here.
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:
This week, CRED iQ calculated real-time valuations for 5 distressed properties that have recently transferred to special servicing, including a storied New York City hotel and a couple of mixed-use projects. 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.
Royalton Park Avenue
(Gansevoort Park Avenue)
249 Keys, Full-Service Hotel, New York, NY 10016
This $124.0 million loan transferred to special servicing on June 3, 2021 due to imminent default. The loan is secured by a luxury boutique hotel that is lcoated in the NoMad submarket of Manhattan and operates under the Royalton brand. Although the mortgage loan was originated in 2012, when the hotel was operating under the Gansevoort brand, the property was acquired for $200 million, equal to $800,000 per key, in 2017 by a joint venture between GreenOak Real Estate and Highgate Hotels. The hotel is temporarily closed and the earliest available reservations were for September 1, 2021.
Although COVID-19 was cited a contributing factor for the transfer to special servicing, the property had operational concerns pre-pandemic with a DSCR of 0.52 in 2019 based on $4.7 million in NCF. This represented a 70% decline since origination. The hotel had a net loss of $8.7 million in 2020 and a modification for relief in the form of relaxed cash management and reserve requirements was previously granted in May 2020. Negotiations between the borrower and LNR, as special servicer, are ongoing. For the full valuation report and loan-level details, click here.
Chatham Village
124,018 sf, Retail, Chicago, IL 60619
This $22.9 million loan transferred to special servicing on June 8, 2021 due to payment default. The loan is secured by four retail buildings, including a single-tenant Walgreens outparcel, located on the South Side of Chicago. All four buildings were formerly shadow-anchored by Target, but the retailer closed the adjacent non-collateral location in 2018. Without a complementary shadow anchor, occupancy across the 3 buildings with in-line suites declined. News broke in March 2021 that Discover would convert the former Target into a credit card call center; however, the development may not produce the necessary foot traffic needed for the property’s retail tenants to achieve sales targets. For the full valuation report and loan-level details, click here.
The Tower
181,285 sf Mixed-Use (Office/Retail), Fort Worth, TX 76102
This $18.9 million loan transferred to special servicing on June 1, 2021, days before its June 6, 2021 maturity date. The loan is secured by office and ground floor retail space that is part of six condominium units. Only four of the six condominium units are collateral for the loan and the condominium association pays ground rent for a portion of the building. Further complicating matters, the property has a tenant-in-common ownership structure. Check out CRED iQ’s Contacts page for more details about owners on record.
The property’s largest tenant had been Alcon Laboratories until it vacated in January 2021 through a lease termination option. Occupancy at the property declined to 48%, which may add difficulty in the borrower group’s search for refinancing options. For the full valuation report and loan-level details, click here.
147-149 Grand Street
8,409 sf, Mixed-Use (Retail/Multifamily), New York, NY 10013
This $12.0 million loan transferred to special servicing on June 7, 2021 due to payment default. The loan is secured by a mixed-use building located in the SoHo submarket of Manhattan that contains 2,850 sf of ground-floor retail space and 6 multifamily units on the upper levels. The loan had a DSCR of 0.77 in 2020 based on $432,000 in NCF and is scheduled to mature in October 2021. Midland Loan Services, as special servicer, sent a default notice and pre-negotiation letter to the borrower. For the full valuation report and loan-level details, click here.
Indian Lake West Plaza
41,328 sf, Retail, Hendersonville, TN 37075
This $6.4 million loan transferred to special servicing on June 14, 2021 due to delinquency. The loan is secured by 41,328 sf of in-line retail space that is shadow-anchored by a Hobby Lobby. Occupancy declined to 84% in early 2021 when the property’s fourth-largest tenant, FitRev Gym, relocated to a nearby Walmart-anchored shopping center. Prior to the transfer to special servicing, the Borrower had cited pandemic-related hardships as a reason for the property being distressed. Complicating matters, the property’s largest tenant, Tuesday Morning, has a lease expiration in January 2022. For the full valuation report and loan-level details, click here.
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:
The overall delinquency ratedeclined compared to the prior month, which marks a full year of downward movement starting from its peak in June 2020. Lodging continues to be the sector leader in delinquent loans with many markets slow to emerge out of pandemic-induced distress. The lodging delinquency rate declined for a majority of the Top 50 MSAs this month but increases in payment defaults are still notable in certain markets such as Bridgeport, CT and Cleveland, OH. Retail continues to move the needle as well, weighted heavily by regional malls, as is the case in the Tucson, AZ market, which had the largest month-over-month % change in delinquency. The two largest retail properties in the MSA are distressed.
CRED iQ monitors market performance for nearly 400 MSAs across the United States. Below is a summary of the default rates for the 50 largest metros segmented by property type. For these 50 MSAs, the highest delinquency was in Minneapolis, followed by Louisville and New Orleans. The Tucson retail market saw the largest month-over-month increase in delinquency. Allentown, Pennsylvania reported the lowest default rate among the 50 MSAs. The most significant month over-month decline in delinquency was in the Memphis market.
By property type, the hotel and retail sectors remain the largest contributors to the delinquency percentages for the majority of these statistical areas. Loans backed by self-storage, multifamily, and industrial facilities posted the lowest delinquency rates for most of these markets.
This week, CRED iQ calculated real-time valuations for 5 distressed lodging and retail assets that we expect to be sold in July. 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.
Homewood Suites – Lansdale
170 keys Extended-Stay Hotel, Lansdale, PA 19446
This $13.7 million loan transferred to special servicing on March 4, 2015 due to delinquencies leading up to its May 6, 2015 maturity date. Special servicer LNR acquired title to the property in 2019. The property is an extended-stay hotel that operates as a Homewood Suites through a franchise agreement with Hilton that expires on May 22, 2022. The hotel is in need of a lobby renovation that could cost approximately $430,000 and a change-of-ownership Property Improvement Plan was quoted at $6.8 million, or $40,000 per key.
Demand for the property was primarily sourced from Merck, which operates a manufacturing facility adjacent to the property and is a major employer in the area; however, the pharmaceutical company laid off 600 local employees in 2014 and cut another 500 local jobs in 2019. NCF was negative for the property in 2020. A sale of the property is expected by the end of July. For the full valuation report and loan-level details, click here.
Springhill Suites – Willow Grove PA
155 keys Limited-Service Hotel, Willow Grove, PA 19090
This $11.4 million loan transferred to special servicing on April 14, 2017 due to delinquency. Special servicer LNR acquired title to the property in 2019. The hotel operates as a SpringHill Suites by Marriott through a franchise agreement that expires in 2027. The franchise agreement has 2, 10-year extension options but also has a termination fee. Two additional Marriott-branded hotels are in the immediate vicinity, including 108 keys for a Fairfield Inn & Suites that was constructed in 2016 on an adjacent parcel, just prior to the SpringHill Suites transfer to special servicing. A Property Improvement Plan will be required upon change of ownership. Occupancy averaged 18% in 2020 and the hotel had negative NCF for the year. Hospitality Real Estate Counselors (HREC) has the sale listing and will auction the property at the end of July. For the full valuation report and loan-level details, click here.
Courtyard By Marriott – Shawnee
90 keys, Full-Service Hotel, Shawnee, KS 66217
This $7.0 million loan transferred to special servicing on April 29, 2020 due to historical cash flow struggles. The loan is secured by a full-service hotel that operates as a Courtyard by Marriott and primarily competes with four other hotels located off Exit 5 of the Interstate 435 loop around Kansas City, MO. Although distinguishable by its brick veneer, the hotel is the second-oldest of it competitive set. The three newest hotels with a total of 256 keys came online between 2014 and 2016 and were the primary cause of operational struggles. Pre-COVID, the property averaged 70% occupancy in 2019 but only had NCF of $151,000. Carry costs and expenses outweighed revenues in 2020.
Foreclosure has been initiated and receivership is in place, but the borrower is permitted to sell the property. The special servicer, Midland Loan Services, stated plans of an auction of loan via a note sale on the Ten-X platform. For the full valuation report and loan-level details, click here.
Bel Air Center
32,200-sf Retail Strip Center, Roseville, CA 95661
This $5.2 million loan transferred to special servicing almost six years ago due to maturity default. The maturity default was related to an ongoing issue related to on-site tetrachloroethylene (PCE) contamination from a drycleaner tenant. A small strip center that is shadow-anchored by a Bel Air grocery store collateralizes the debt. Receivership has been established and an environmental engineering firm has been retained for further testing and remediation plans. The special servicer has postponed a foreclosure sale multiple times and has opted for a note sale via auction. Interested parties may want to pay close attention to the property’s Environmental Site Assessment reports as remediation of PCE contamination is a costly endeavor. For the full valuation report and loan-level details, click here.
High Ridge Center
260,664-sf Retail Center, Racine, WI 53406
This distressed property with an associated balance of $9.6 million has been REO for over five years since LNR acquired title on February 12, 2015. The property is a nearly vacant retail center save for a 111,493-sf Home Depot with a lease that expires on April 30, 2023. Home Depot appears to have paid $743,000 in base rent during 2020. We anticipate the property to hit the auction circuit at the end of July. For loan-level details, click here.
About CRED iQ
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:
