The commercial mortgage bond market breathed a sigh of relief Friday after JCPenney released a list of 138 stores it plans to shutter in an effort to reduce costs and drive sales growth.

Turns out these locations back just 11 commercial mortgages that help collateralize $894.4 million of mortgage bonds, according to Trepp.

The closures together amount to roughly 13% -14% of JCPenney’s total store count and will include the closing of one of its supply chain facilities in Lakeland, Florida, as well as the relocation of its Buena Park, CA supply chain warehouse. The liquidation process is expected to commence on April 17th and an estimated 5,000 employees will be affected nationwide by the closures.

In a report published Friday, Trepp said the exposure was not as great as some in the CMBS market had feared. The 11 impacted loans are split among 13 CMBS deals, some of the loans are backed by retail properties and malls that have already been foreclosed upon or are REO.

A large chunk of that came from a single, $388.5 million note on the Palisades Center, which comprises 3.37% of JMDB 2016-C2 and makes up 100% of the single asset deal, PCT 2016-PLSD. JCPenney occupies around 8.30% of the 1.9 million square foot mall in West Nyack, NY with a lease that is scheduled to run through March 2018. The loan is current and is slated to mature in April 2021.

JCPenney is also the fourth largest tenant at the Franklin Mills (also known as Philadelphia Mills) shopping center in Philadelphia, Pennsylvania. The retailer occupies 6.67% of the 1.6 million square foot super-regional mall built in 1989, with a lease that expires in February 2022. The $278.2 million Franklin Mills was originally split into a $174 million note in JPMCC 2007-LD11 and a $116 million piece in GSMS 2007-GG10 at securitization, but was later bifurcated into separate A/B notes in November 2012. The modification also extended the loan’s maturity date through June 2019 and introduced varying rate changes.  The Franklin Mills note is one of the few loans that are still outstanding in the high-profile Simon/Farallon retail portfolio.

Another loan to keep watch on, according to Trepp, is the $10.4 million Hilltop Mall note which makes up 1.10% of JPMCC 2012-CBX. With a lease that expires in October 2019, JCPenney is the top tenant and occupies 40,864 square foot (or 24% of NRA) of the 172,933 square foot shopping center in Kearney, Nebraska. Set to mature in June 2022, the loan posted a DSCR (NCF) and occupancy of 1.45x and 89% for the 2016 fiscal year.

Notably, however, there was almost no exposure in futures indexes, which have been under pressure for weeks amid concerns about their exposure to ailing retailers.  There is no exposure at ll in CMBX 6 through 9, according to JPMorgan. though a report published by the firm late Friday did find one small loan impacted in CMBX 10.

This evidently led to some short-covering, as the indexes rallied.  Early reaction post announcement was most significant in CMBX 6 and 7 BBs, which tightened by 19 basis points and  24 basis points, respectively.

In a conference call with investors Friday, analysts at JPMorgan pointed out that store closures "need not be a bad thing for mall owners, as they take back the space for potentially more productive use after repurposing or re-developing those spaces," JPMorgan said in its report.

"In particular, our colleagues observed that public mall REITs had managed their portfolios and tenant mixes in a way that had enhanced overall center sales and income. Indeed, retailers come and go, and as an example, Simon Property Group has been changing its tenant roster over time."

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