J.C. Penney plans to close 33 underperforming stores. Many of the stores lined up for closure have leases expiring over the coming year or two, according to a Barclays report.
The retailer is the number one CMBS tenant exposure and nine CMBS have exposure to the closings.
In eight cases, the J.C. Penney store is part of the collateral for the loan. The largest is the $115 million Centre at Salisbury in JPMCC 2006-LDP7, which is reporting debt service coverage ratio of 1.31.
“Several of these malls have [debt service coverage ratios] that are only slightly above the 1.0x mark and may well be unable to cover debt service once the JCP lease expires,” said Barclays analysts in the report.
In the GMACC 2004-C2 conduit, the store is not collateral for the loan but it is the biggest anchor store occupying more that 200,000sf of floor space, according to Barclays.The store closure will lead to decreased foot traffic that could lower rents and invoke potential co-tenancy clauses.
Barclays said that closure would impact already stressed retailers, like Sears, which is also facing considerable pressure from the equity and credit markets after a disappointing fourth quarter.