Thursday, April 25, 2013

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. 

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.

Monday, April 15, 2013

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.

Friday, April 12, 2013

KMart makes a funny commercial

With cutting edge commercials like this, they might make a solid comeback. I'm going to adjust our models to treat them a little more favorably as tenants.

Monday, April 1, 2013

GCCFC 2007-GG9 - COPT Office Portfolio in Special Servicing

Fitch and Barclays are reporting this loan flipped into Special Servicing due to imminent default. Roughly 2/3rds of the underlying properties are located around Baltimore and have heavy exposure to GSA tenants which were severely impacted by BRAC in that area.

Office Markets in places like Huntsville AL (where a large portion of civilian support positions were relocated due to BRAC) have benefited while areas in the greater DC area have been hurt.

Barclays notes that this could impact the AJ, but also highlights the other three COPT Office Portfolios in CMLT 2008-LS1 ($150mm, Northrop, the third largest tenant amongst the two collateral properties, terminated its lease and plans to leave this year), MSC 2006-HQ8 ($108.5mm), and GSMS 2006-GG6 ($103mm).

CRE Fundamentals

Wells posted their CRE Chartbook a few weeks ago (you can request it, and other reports via, which contains an amalgamation of a number of useful charts and data from various sources. They also have some summary commentary on each sector. I pulled out a few interesting charts below:

CMBS is a dwindling piece of the pie, losing 1.7% net issuance during the 3rd Quarter 2012, although GSE deals gained ground.

There are still some problems to get worked out... This chart shows the status of all CRE loans, not just CMBS.

Delinquencies have improved dramatically. (Also all CRE)

Retail prices seem lofty, perhaps JCP should re-evaluate a REIT conversion.