Fort Worth's Ridgmar Mall Appraisal Drops $53M. Is A Foreclosure Or Debt Restructuring In Its Future?
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A special servicer is working with the borrower to determine the eventual outcome for the retail property, whether through some type of restructuring, extension of the maturity date or modification, Trepp said in a note.
Ridgmar's problems became apparent when Trepp dove deep into the COMM 2014-UBS5 securitization and discovered Ridgmar Mall represented 2.68% of the collateral backing the securitized loans.
At the time of securitization in 2014, the 400K SF Ridgmar Mall had an appraised value of $66.4M — a figure that has quickly dropped to $13.5M in recent appraisals, according to Trepp.
The loan backed by Ridgmar's retail space was valued at $30.8M during origination, which means the mall's current appraisal value doesn't even equal half the original loan amount.
Trepp Senior Managing Director Manus Clancy said most of the mall's tenants own their own space, so it is unlikely the debt covers the entirety of the mall.
A special servicer involved with the debt since late 2017 sent a notice to Trepp saying net operating income at the property "has decreased significantly since loan origination due to the loss of three out [of] five anchor tenants and the subsequent departure of several inline tenants," Trepp told Bisnow.
The mall is 81% occupied, but Clancy said Ridgmar is facing the same tectonic shifts transforming the rest of the retail industry. It has suffered a series of blows through the loss of retail anchors Neiman Marcus and Macy's in recent years. Sears also announced plans last year to close its Ridgmar Mall location.
How Does This Impact Malls And CMBS Investors?
The declining value of the mall's collateral is part of a larger U.S. retail trend.
"I think it's happening all over the country," Clancy said. "It is common to see malls lose one, two or three anchors, [and then see] their value cut and borrowers have to renegotiate the terms [of the debt] or a foreclosure takes place."
Older malls like Ridgmar, which was built in 1976, are particularly feeling the brunt.
"If you are digging a little deeper, the trend is that B and C-class malls, or older malls, those are the ones that are more in the crosshairs of the problem than the newer Class-A malls," Clancy said.
As far as investors with a stake in this particular securitization, Clancy said the outcome is case-specific for CMBS investors with exposure to Ridgmar Mall.
"If you are a Triple-A investor, you are probably not really concerned about this," he said. "If you are somebody who bought the single-B, the double-B or the riskier tranches of the deal, this is something that could potentially put your principal at risk over time if it's combined with other losses. So depending on where you've invested in the stack depends on how much you're losing sleep."