Here is another commercial real estate credit report from Trepp on CMBS. This deal is off about 60% from its 2006 value. Never invest in a project that uses the words “Galleria” or “Centre” or “Pointe.” “Officentre”? Sounds more like “off center.”
Michigan Office Sees Value Shaved By More Than Half
The $86.2 million Galleria Officentre loan saw a whopping appraisal reduction of $43.4 million according to the May remittance report.
We first reported on this loan last September when it was transferred to special servicing due to a deteriorating DSCR. A combination of decreasing occupancy and lower lease rates took its toll on the property’s performance (see that story here).
The loan was set to mature in April but according to the servicer commentary the borrower has been unable to obtain new financing. The loan has been in special serving for about nine months now, but over the last 30 days Torchlight Loan Services has been tapped to take over those responsibilities.
In 2006, the class-A one million square foot office complex in Southfield, MI was appraised for $112 million. After four years of plummeting financials–with NOI and NCF down 67% and 70% respectively–the complex received a sobering appraisal of $48.1 million late last year.
The Galleria Officentre loan makes up 2.8% of the GECMC 2007-C1 deal. A loss of $43.4 million would push losses up to the H tranche for that deal.
The GECMC securitization is no stranger to appraisal reductions. About 11% of its loans are carrying appraisals reductions and their cumulative “haircuts” total about 5% of the deal’s current balance–$161 million in total. Cumulative bond loss have already reached about $180 million with eight bonds being totally written off. Given the current roster of loans with appraisal reductions, it certainly seems like there will be more to come.