Retailers

Top retail-mall owner Taubman has approached the market with a $1 billion CMBS deal to refinance the existing debt that is collateralized by one of the highest volume shopping centers in the U.S.

KBRA estimates that the property has a net operating income of $101.4 million; a 7.25% cap rate, and an in-trust debt service coverage of 1.18x at term Secured Overnight Financing Rate (SOFR).

The delinquency rate on regional mall commercial mortgage-backed securities was 22.9% in February, the highest of any real estate category, according to Moody’s

The sponsor has refrained from multi-borrower deals since March 2020, but has pooled together 28 loan participations from 40 properties – including notable concentrations in retail and lodging.

About $4 billion in value was erased from 118 retail-anchored properties with commercial mortgage-backed securities debt after reappraisals triggered by payment delinquencies, defaults or foreclosures.

Declining month-over-month delinquency levels and the rollout of COVID-19 vaccinations potentially give hope to more normalized economic activity.

The largest U.S. shopping center became delinquent on its debt last year after its owner Triple Five Group began skipping mortgage payments, citing hardships from the COVID-19 pandemic.

Reports indicate distressed owners would rather surrender their hotel or retail properties instead of negotiate workouts on delinquent loans as the pandemic spread carries on.

The more-than-$550 billion market for bonds backed by U.S. commercial mortgages may face losses even after promising Covid-19 vaccines become widespread, as key parts of the real estate market may not return to full strength anytime soon.

Debt delinquencies have soared for mall owners, which lost market share to e-commerce and were hit with tenant bankruptcies even before the pandemic forced shoppers and diners to stay home. By last month, more than 9% of retail commercial mortgage-backed securities were managed by special servicers.