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Tuesday, 29 January 2013

CMBS Loan Against Phila. Retail Center Seen Taking Big Loss

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Commercial Real Estate Direct Staff Report

The $43 million CMBS loan against Liberty Plaza, a 371,505-square-foot retail center in Philadelphia, has been transferred to special servicer C-III Asset Management because it's expected to default.

And the expectation is that the loan's resolution could result in a substantial loss to the CMBS trust that owns it, JPMorgan Chase Commercial Mortgage Securities Corp., 2007-LDP12. Nomura Securities expects the loss to be as much as $30.5 million, for a 71 percent severity.

The loan, which requires only interest payments through its 2017 maturity, pays a coupon of 5.68 percent.

Liberty Plaza, at 1455 Franklin Mills Circle, next to the 1.5 million-sf Franklin Mills Mall, has suffered of late from leasing issues. Both properties are owned by affiliates of Simon Property Group.

Liberty Plaza is anchored by Walmart, Dick's Sporting Goods and Pathmark. Its loan was underwritten with the assumption that the property would generate $3.1 million of cash flow. It came close to that in 2010, when it generated $3 million. But cash flow has suffered since then and no longer is sufficient to cover the interest-only loan's servicing requirement.

According to Nomura's analysis, Dick's, which occupies 77,586 sf, renewed its lease in 2010 for another five years through 2016. But it was able to negotiate a reduction in rent. Last year, based on financials through the end of June, the property was generating only 92 percent of the amount needed to service its debt.

Things are about to get worse for the property. Walmart, which occupies 131,812 sf, or 36 percent of the property, is moving to the Franklin Mills Mall. Its lease matures in March. When that happens, Liberty Plaza's cash flow will shrink to $1.2 million from the $2.1 million it was on track to generate last year, according to Nomura's analysis. That level of cash flow would result in a property value of roughly $14 million, which would result in a loss of some $30.5 million, after fees and costs are taken into account.

Simon classifies the property as a non-core holding, an indication that it's probably not willing to subsidize its debt-service payments.

Walmart's move to the Franklin Mills property facilitated the modification of it's $290 million mortgage, which was securitized through JPMorgan 2007-LDP11. That loan, which had been in special servicing since last April, was split into a $200 million A-note and $90 million B-note. But the A-note will be paid down by $12 million to $188 million when Walmart completes its purchase of space at the property.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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Additional Info

  • Syndicate to Realpoint: No
  • Cities: Philadelphia
  • States: Pennsylvania
  • Sector: Retail
  • Subject: Commercial MBS (CMBS), Mortgages/Financing (MOR)
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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