This just came in from Trepp, a company that keeps track of CMBS (commercial real estate). Here is another Simon Properties deal that looks weak. There is still underlying rottenness in the CRE market, especially in retail.
Report: Tenant Issue Threatens to Sink Philadelphia Retail Loan
The sharp eyes of Lea Overby and Steven Romasko at Nomura picked up on a largely unreported development on the $43 million Liberty Plaza loan. The note makes up almost 2% of the collateral behind JPMCC 2007-LD12.
Until Thursday, investors probably believed that the Liberty Plaza loan was among the least of their concerns. The property is a 372,000 square foot anchored retail property in Philadelphia. The mall is owned by the Simon Property Group and has never been delinquent. The loan has never been with the special servicer, although it was placed on watchlist in July. Reported occupancy has been strong at 99%, but financial performance has fallen off recently. The DSCR dropped from 1.19x in 2010 to 1.02 in 2011.
What caught Nomura’s eyes was a press report that Wal-Mart, the lead anchor at Liberty Plaza with over 35% of the space, would be vacating the mall. The report indicates that Wal-Mart will be relocating to a nearby location that once housed a Boscov’s. (The original article can be found here.)
The Nomura piece suggests that between the loss of Wal-Mart as a tenant and the impact of co-tenancy rent reductions or tenant departures, the Liberty Plaza loan could take a loss of 100% on the $43 million loan. The Wal-Mart lease is slated to end in March 2013. The loan does not mature until 2017.
Almost 11% of the collateral behind the LD12 deal is already delinquent and another 4.3% is performing but with the special servicer. Those numbers are without any potential impact from the Liberty Plaza loan.