Trouble on the horizon for CMBS 2.0 loans tied to ailing malls

US CMBS 2.0 loans in special servicing will remain low until they approach maturity; but if it’s a sign of things to come, the two largest loans are tied to ailing malls, echoing problems with the previous generation of retail CMBS.

US CMBS 2.0 loans in special servicing will remain low until they approach maturity; but if it’s a sign of things to come, the two largest loans are tied to ailing malls, echoing problems with the previous generation of retail CMBS.

Out of all Fitch-rated CMBS 2.0 loans from 2010 through 2015 vintages, 27 conduit loans totaling $282m, or just 0.1%, are in special servicing.

Mary MacNeill
Mary MacNeill

Of the 27, the only two loans larger than $20m are a $50m loan backing the Hudson Valley Mall (Kingston, New York) and a $30.4m loan on Commons of Manahawkin Village (Manahawkin, New Jersey).

Retail loans falling into special servicing typically back malls in weaker secondary or tertiary markets, especially malls suffering from the departure of an anchor tenant. Hudson Valley Mall, for instance, lost anchor tenant JCPenney this year.

“It’s in a market that doesn’t have a whole lot of industry and there’s a relatively weak market around it,” Mary MacNeill, a managing director with Fitch Ratings, told Real Estate Capital.

The Hudson Valley Mall loan represents 8.6% of CFCRE 2011-C1 transaction; and the Commons at Manahawkin Village represents 2.3% of WFRBS 2011-C3 .

While MacNeill said she does not believe these issues will be widespread, she did express concern with the same types of malls losing anchor tenants.

“We’ve seen that with [CMBS] 1.0,” she said.

Of the oncoming $300bn wave of vintage 10-year loans expected to mature between 2015 through 2007, nearly one-third of the balance will come from loans backed by retail properties. More than $20bn of that $90bn or so in retail loans could run into trouble when it comes time to refinance,  according to a recent report from Trepp.

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