Surveillance: Four Loans to Watch – Value Reductions, CMBS Purgatory, Extensions

Despite the uncertainty surrounding the Delta Variant of Covid-19, expectations concerning the U.S. economic recovery remain the same. Economists still hold expectations of steady hiring and continued spending, and have yet to claim the new variant as being a signal of immediate economic risk.

However, there is growing concern regarding accelerated inflation. The Fed largely attributes the overshooting in inflation to transitory factors related to the economy's rebound from the pandemic, yet the path of future inflation remains unclear.

Trepp will continue to monitor the impact of the economic recovery on the CMBS universe.

See below for coverage of the latest loans to watch in July 2021.

Mariott Chicago River North Hotel (Chicago, IL)

A new valuation was released for the collateral behind the $97.9 million Marriott Chicago River North Hotelloan. The appraisal puts the value at about 14% lower than the current loan balance. The collateral is a 523-key, full-service hotel at 410 North Dearborn Street in Chicago. The property was built in 2008.

In 2013, the hotel was valued at $191 million. This month the value was lowered to $84.1 million. The last payment on the loan was made in April 2020. The note has been in special servicing since last summer. The loan is split between two 2013 CMBS deals. A $53.0 million piecemakes up 5.93% of MSBAM 2013-C12and a $44.9 million slicemakes up 7.88% of MSBAM 2013-C11. Both deals are part of CMBX 7. The loan has about $13 million in outstanding advances according to servicer data.

Newport Centre (Jersey City, NJ)

Back in May, Trepp noted in our daily, client-only newsletter, TreppWire, that the $168 million Newport Centreloan was not paid off when the loan matured that month. The loan has remained in CMBS purgatory for the last three months. This month, however, new special servicer notes indicate the borrower is looking for a three-year extension. The borrower and the special servicer are in negotiations.

Investors in the JPMCC 2011-C4deal should footnote this potential extension when running cash flow projections. The loan makes up 87.1% of that deal.

The loan is backed by almost 1.15 million square feet of space in a Jersey City, NJ superregional mall. The property was built in 1987 and was renovated in 2005. Collateral tenants include Macy's, Sears, and Kohls. The mall also includes a non-collateral JCPenney.

For 2020, the loan posted a DSCR (NCF) of 1.85x. The loan was delinquent for several months in 2020 but a modification later permitted the borrower to forego principal payments on the loan for three months. The loan became current after that modification.

The collateral was valued at $337 million in 2011. As we noted in May, an updated valuation to justify the modification was produced by JLL in October 2020. That value was $321 million on an 'as-is' basis.

The Clusters (Midland, TX)

The $26.1 million The Clustersloan was put on the servicer watchlist this month. Even though servicer data doesn't yet reflect the move, the watchlist comments indicate that occupancy data at year-end 2020 was 77%.

The collateral is a 352-unit apartment complex in Midland, TX. The property was built in 1982 and was renovated in 2014.

As of June 2020, occupancy was 86% according to servicer data. For the twelve months ending at that time, DSCR (NCF) was 1.92x. The loan makes up 2.83% of the collateral behind GSMS 2014-GC24. The loan is current and matures in 2024.

The Tower (Forth Worth, TX)

According to July servicer data for the $18.9 million The Towerloan, the special servicer workout code has been set to 'payoff in full.' The loan was slated to pay off last month and remained unresolved this month.

The subject property is a mixed-use retail/office condo located in Fort Worth, TX that totals 181,285 square feet. Its largest tenant was global medical company Alcon Laboratories, which occupied 68,136 square feet, or 37.6% of the NRA. The firm vacated in January 2021 via a termination option. That took occupancy at the collateral from 85% in 2020 to 46% in Q1 2021.

The note represents 28.8% of the remaining balance behind DBUBS 2011-LC2A. The collateral was valued at $34.5 million in 2011.

For more info on CMBS loans to watch, contact us at[email protected].

Originally published in TreppWire, which is distributed every morning as a client-only email newsletter. TreppWire enables readers to stay up-to-date on market activity while providing a competitive advantage over others. TreppWire leverages Trepp's market expertise and proprietary data sets to provide daily market commentary, trend analysis, research, and breaking news to its clients.

Editor's Note: The information referenced in this blog post with regards to the CMBS loans, deals, and properties is sourced from the corresponding monthly remittance reports published by the CMBS trust. The loan names are given by the issuer at securitization and may not indicate borrower or owner affiliation. In many of the above scenarios, the borrower may be in the process of securing additional financing or approval for term extension/modification options, and/or pursuing workout strategies with affiliated parties.

The information provided is based on information generally available to the public from sources believed to be reliable.

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