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Friday, 26 October 2018

Last Asset in BACM 2006-3 Becomes REO

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Commercial Real Estate Direct Staff Report

The Washington Prime Group affiliate that owns the Rushmore Mall in Rapid City, S.D., last week turned the property over to its lender, Banc of America Commercial Mortgage Trust, 2006-3, which had held a $94 million loan against it.

The 831,041-square-foot property - 754,565 sf of which served as collateral for the CMBS loan - is the sole asset remaining in the collateral pool for BACM 2006-3, which originally was backed by 97 loans with a balance of $2 billion. The deal so far has suffered $379.2 million of losses, or 19.3 percent of its original balance, according to servicer data compiled by Trepp LLC. It's accumulated $26.7 million of interest shortfalls.

Rushmore Mall was appraised at a value of $117.5 million when its CMBS loan was originated in 2006. The property at the time was owned by a venture of Simon Property Group and Macerich Co. It then was anchored by JCPenney, which occupied 89,909 sf; Sears, in 124,215 sf; Herberger's, in 88,977 sf, and Hobby Lobby, in 66,000 sf.

The loan transferred to special servicing in 2011 when it became unclear whether JCPenney would renew its lease later that year. Ultimately, it extended its lease for five years, and more recently extended it further, through March 2036. In 2012, Simon took full control of the property and later said the mall wasn't worth as much as was owed against it. As a result, the loan moved back to special servicing because it was expected to default.

Simon included the mall among the 98 it spun off in 2013 through what is now known as Washington Prime. The following year, the loan was modified into a $58 million A-note and $36 million B-note and its maturity was extended through February 2019 from 2016. As part of the modification, Washington Prime had acquired the then-vacant Target store at the property. The plan was to move JCPenney to that site so much-needed repairs could be completed at JCPenney's store.

Earlier this year, the loan transferred to special servicing again as the mall was facing substantial vacancies, pressuring cash flow. Anchor Herberger's was a brand owned by Bon-Ton Stores Inc., which had filed for bankruptcy and liquidated earlier this year. And Sears vacated its space earlier this year.

Washington Prime in May said it might give up on the property as it considered it to be non-core to its portfolio and over-leveraged. In a conference call this week, executives at the company noted the loan's debt yield was in the single digits, making it nearly impossible to refinance.

Added Mark Yale, the REIT's chief financial officer: "These transitions afford us a nice opportunity to efficiently de-lever(age)." By giving the property up to the CMBS trust, the REIT effectively reduces its overall indebtedness.

Meanwhile, the property was appraised last June at a value of $37.1 million.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.


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Additional Info

  • Syndicate to Realpoint: No
  • Cities: Rapid City
  • States: South Dakota
  • Sector: Retail
  • Subject: Commercial MBS (CMBS), Property Acquisitions (ACQ), Property Management (MGMT)
  • Deal Name: Banc of America Comm Mtg Trust 2006-3
  • Private: No
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