Sixteen CMBS loans, representing a balance of $1.75 billion, against enclosed shopping malls have been modified over the past 12 months, including extensions ranging from 12 months to 84 months, according to a Trepp analysis. The longest extensions were granted as part of efforts to sell the underlying shopping malls, said the report.
Of the modified loans, 72% of the outstanding balance matures within the next three years. A large share shows sub-10% debt yields on existing loans, well below common refinance hurdles in today’s capital markets, the analysis shows. The short remaining term on assets that have already required at least one intervention point to a high likelihood of further modifications or distressed disposition, said Trepp.
The analysis highlighted several properties among the modified loan contingent that were extended to facilitate sales, including RiverTown Crossing Mall in suburban Grand Rapids, Michigan. The loan against a $130.48 million mortgage was expected to default at its June 2021 maturity. The property was sold in October to Poag Development Group, which assumed the loan, paid it down by $14.62 million and secured an extension through June 2028.
The two CMBS trusts that hold the loan, COMM, 2012-CCRE1, and CFCRE Commercial Mortgage Securities Trust, 2011-C2, will receive all excess cash flow the shopping mall generates, with most of that going to pay down the balance, which now stands at $114.88 million. Trepp said it is still too early to tell whether the property’s prospects have improved.
More recently, the $187 million mortgage against the Valencia Town Center shopping mall in Southern California was extended through September 2024 from its original maturity in August 2023. The loan was extended to facilitate the property’s acquisition by Centennial Real Estate Management, which has sought financial assistance from the city of Santa Clarita to fund the property’s redevelopment into mixed-use. Plans call for senior housing, revamped retail and a large parking structure.
Not all extensions have been granted as part of a collateral property sale, the report noted. Brookfield, for example, negotiated a two-year term extension of the financing against three shopping malls it owns in Alabama, South Carolina and Minnesota. The investment manager has paid down the loan's balance by $20 million to $258.63 million, but the extension wasn't enough, and Brookfield executed an option, taking the final maturity through next month.
Meanwhile, the $61.23 million loan against the 1.6 million-square-foot Greece Ridge Center shopping mall in Rochester, New York, which in 2022 was split into a $50 million A note and $11.23 million B note as part of a modification, was extended through the end of this year. The property, owned by Wilmorite Management Group, was appraised in 2020 at a value of $45 million, down from $147 million 10 years earlier, when the loan was written. It was 86% occupied and generated $965,867 during the first quarter, according to TreppCRE data. That puts it on track to generate $3.86 million for the year, said Trepp.
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