Stuy Town Rent Increases

Checked in on Stuy Town this morning, there were tenant protesting notes they all received under their doors last night stating rents were being increased 21% in two weeks. Sounds like everyone got them. Payup or move out was the message...

Nerd Fight!

Fitch does not seem to agree with Kroll's rating of a $782.75M, interest-only mortgage that was stuffed into the recent CGCMT 2013-375P deal.  For the uninitiated, Fitch seems to believe that the underwriting assumptions used to finance RFR Realty's acquisition of the Seagram Building is a bit aspirational, to say the least.

Basically:

"--2010: $53,560,729 (average occupancy of 96.9%);
--2011: $56,745,150 (average occupancy of 96.6%);
--2012: $54,078,388 (average occupancy of 94.4%).

This compares to the issuer's NOI of approximately $74 million and average occupancy assumption of 96.7%."

Citi and Deutsche  underwrote this one with about $20M in pro-forma income.  That is, the banks assumed that the property's earnings would increase ~37% via the following:

"--$10.2 million from the mark to market of rents assuming $135 psf for floors 2-12, $145 psf for floors 13-38 and $125 psf for the retail space;
--$7.8 million from the lease up of vacant space from 90.2% to 96.7%; and
--$2.2 million from a recent re-measurement of the building increasing the total sf to 858,000 sf."

I'm in the middle on this one.  On one hand I'd like to believe that Fitch has a point and is acting prudently but on the other hand, it seems as if they're still trying to make amends for missing some of the market tops that occurred in 2006 and 2007.  Not sure if Fitch is being proactive or reactive.

And then there was this (emphasis added):
Fitch provided preliminary feedback of $510 million at investment grade and was not asked to rate the transaction. 

But despite any butt-hurtness on the part of Fitch, I take a look at KBRA's assumptions and also the mezz jammed into this deal and it does make a Jingle Male wonder:

Right-click and select "View Image"

 So yes, let's see how this one plays out. 



~Jingle Male

Another >100% Loss Severity

East Ridge Mall ($44.5mm - WBCMT 2005-C22) was liquidated last month after GGP tossed the keys back to the servicer. The sales price came in at $7mm (was appraised at $13.7mm in August!), which Barclays expects to result in 100% loss in principal, partial payback of outstanding ASERs, TI&LCs and transaction costs.

This follows several other recent 100% (or close to it) loss severities in recent months:

• Oviedo Marketplace ($55mm MSC 2005-HQ6) - 108% severity
• Lakeview Square Mall ($43mm - COMM 2006-C7) - 100% severity
• Prestige Place I & II ($15.2mm  - GSMS 2006-GG8) - 92% severity
• Parmatown Shopping Center ($61.6mm - GMACC 2004-C2) - 91% severity
• AnchorBay ($41.2mm - MLMT 2003-KEY1) - 100%
• Carefree Eastern ($11.3mm - WBCMT 2006-C28) - 96% 
• Metro I Building ($40mm - COMM 2004-LB4A) - 100%
• Pentagon Park ($18.5mm - MLCFC 2006-4) - 94%
• Hilton Tapatio ($55.25mm - BSCMS 2006-T24) - 90%
• Livonia Industrial Properties ($16.3mm - LBUBS 2005-C1) - 96%
• Empire Towers ($14.6mm - MSC 2007-T27) - 108%
• Lightstone Portfolio ($62.5mm JPMCC 2006-CB15) - 90.7% severity
• City View Portfolio ($69mm JPMCC 2006-CB16) -  101% severity

I'm sure I'm missing some too, but there has definitely been an uptick in 100% loss severities. Before the Great Recession 100+ loss severities in CMBS were rare birds, with stories such as Doctor's Hospital (pre 9/11) resulting in the arrest of the sponsor (but the head of origination that made the loan runs his own company today - its all in your perspective). I wonder if anyone has done a piece on 100%+ Loss Severities throughout history...

KeyBank adds to servicing platform with Berkadia and BAML deals

KeyBank is closing the second of two deals that will make it the third largest CMBS servicer. Globe St reports:

has arranged to buy Bank of America N.A.’s $110.5-billion CMBS servicing portfolio, along with a CMBS special servicing portfolio of about $14 billion. Additionally, the firm entered into a long-term sub-servicing agreement with Berkadia Commercial Mortgage LLC to buy up its CMBS special servicing business. If the deals go through, KeyBank will have a $205-billion servicing portfolio, becoming the third largest named servicer of commercial/multifamily loans in the US. On a pro forma basis, upon closing it will be named special servicer on approximately $47 billion of CMBS, making KeyBank the fifth largest CMBS special servicer

H/T CoS 

Brookfield to Acquire MPG

Nomura reported this morning that MPG is being taken over by a Brookfield-controlled entity named DTLA at $3.15 per share. This likely a huge positive for CMBS where MPG is a sponsor for some of the underlying loans. MPG road the leverage wave right up until the peak, and when the bubble burst they (and they're founder, of the same name) were one of the hardest hit CRE investors. Not only were they overlevered, they had the highest concentration of residential mortgage companies (servicers, originators, etc.) as tenants amongst REITs.

The potential negative, as Nomura points out, is that it may give DTLA more leverage to work out modifications on the problem assets. 

Exposure:
Wells Fargo Tower (GSMS 2007-GG10), Gas Company Tower (JPMCC 2006-LDP8, WBCMT 2006-C28) are listed as the most likely to see modifications. The other exposures are 777 Tower (BACM 2006-6), BoA Plaza (MSC 2004-HQ4), Ernst & Young Tower (WBCMT 2004-C12), and then a couple properties not in CMBS - KPMG Tower and 601 S. Figueroa.

Boston Attack Exposure

The explosions in Boston are horrific and will go down as another sad day in this country's history.


However, staring at CMBS loans all day leads my thoughts immediately to potential exposure. It is probably a little too soon, but nonetheless there are likely to be lasting consequences to the impacted area.

The two primary explosions that caused the most damage were in the 600 and 700 blocks of Boylston Street (specifically the addresses listed were 671 and 755). The only CMBS property in the immediate vicinity is the 761- 793 Boylston Street loan in CGCMT 2007-C6, representing 0.24% of the deal. In the horrific photos, which are widely available elsewhere, you'll notice a line of stores behind the aftermath starting with a Crate & Barrel on the left side (West) of the images, and continuing right (East) you'll see an Atlantic Fish Co, Forum (the blast appeared to be centered here), and Starbucks. The building with the Crate & Barrel and all the buildings to the left (West) of it back to Fairfield Street are part of this collateral property.

Only three other loans have properties within a few blocks, and both are approximately 1-3 blocks away from the attacks:
GSMS 2007-EOP - 500 Boylston (JV) (I don't *think* this has been released)
CGCMT 2007-C6 - The Wesleyan Building (0.20% of deal)
JPMCC 2007-LD11 - 399 Boylston (1.45% of deal)

Each of these are office and less likely to be impacted then street level retail.