CW Capital Auction

We're starting to see results from the CWCapital Auction trickle out in servicer reports and in the news.


In particular:

1. 119 West 40th Street (GSMS 2007-GG10) - latest file reflects a $171mm sales price (note this reflects the listed proceeds in the monthly report and is higher than the BBG article estimate). Unlike the other loans in this list, this is a loan sale (the others were REO already). It is 106% of outstanding loan balance, a 40% premium over the 9/2012 appraisal,  and resulted in a 30% loss severity.


2. Two California Plaza (GSMS 2007-GG10) - CIM purchased. No price or estimate available. Largest asset in the sale. BBG noted that part of the transaction included CIM taking over property at the end of 2014 (REO sale). The most recent appraisal was $343mm in 1/2013 vs a $468mm loan balance outstanding. 


3. Montclair Plaza (WBCMT 2006-C28) - CIM purchased for $170mm, 89% of outstanding balance, 13% over 2/2013 appraisal, 29% estimated loss severity (after accounting for advances, etc.).


4. Four Seasons Resort and Club Dallas (WBCMT 2006-C28) - BBG estimates $150.5mm sales price, 86% of outstanding loan value, 12% premium over the 9/2013 appraisal, 28% estimated loss severity (after accounting for advances, etc.).

As an aside, the BBG article mentioned PCV/ST in the context of the $3.4 billion appraisal from 9/2013, and the increasing likelihood of a disposition in the second half of 2014.

JCP Closing 33 Stores

According to the WSJ, JCP is closing 33 Stores. I'll update this entry with CMBS exposures if/when I get a chance.

State	City	Shopping Center
AL	Selma	Selma Mall
CA	Rancho Cucamonga	Arrow Plaza
CO	Colorado Springs	Chapel Hills Mall
CT	Meriden	Meriden Square
FL	Leesburg	Lake Square Mall
FL	Port Richey	Gulf View Square
IA	Muscatine	Muscatine Mall
IL	Bloomingdale	Stratford Square Mall
IL	Forsyth	Hickory Point Mall
IN	Marion	Five Points Mall
IN	Warsaw	Marketplace Shopping Center
MD	Salisbury	The Centre at Salisbury
MI	Marquette	Westwood Plaza
MN	Worthington	Northland Mall
MS	Gautier	Singing River Mall
MS	Natchez	Natchez Mall
MT	Butte	Butte Plaza Shopping Center
MT	Cut Bank	(N/A)
NC	Kinston	Vernon Park Mall
NJ	Burlington	Burlington Center
NJ	Phillipsburg	Phillipsburg Mall
OH	Wooster	Wayne Towne Plaza
PA	Exton	Exton Square Mall
PA	Hazleton	Laurel Mall
PA	Washington	Washington Mall
TN	Chattanooga	Northgate Mall
VA	Bristol	Bristol Mall
VA	Norfolk	Military Circle Mall
WI	Fond Du Lac	Forest Mall
WI	Janesville	Janesville Mall
WI	Rhinelander	Lincoln Plaza Center
WI	Rice Lake	Cedar Mall
WI	Wausau	Wausau Mall

*UPDATE*
Deal Exposures:

Shopping Center	Deal	Loan PCT Deal
Military Circle Mall	GMACC 2004-C2	9.80%
The Centre at Salisbury	JPMCC 2006-LDP7	3.70%
Hickory Point Mall	BSCMS 2006-PW11	1.90%
Laurel Mall	BSCMS 2007-PW17	1.70%
Wausau Mall	WFRBS 2011-C4	1.30%
Marketplace Shopping Center	CGCMT 2004-C2	0.90%
Bristol Mall	BACM 2006-5	0.90%
Wayne Towne Plaza	MSC 2007-IQ15	0.60%
Natchez Mall	CGCMT 2006-C4	0.50%
Lincoln Plaza Center	GSMS 2006-GG6	0.10%

Source: Credit Suisse.

Macy's is moving out of five malls

Three are not in CMBS deals: Metcalf South Shopping Center, Jamestown Mall, and Medley Centre.

One is part of the collateral in Fashion Place Murray, UT in BBUBS 2012-TFT.

One is not part of the collateral but does serve as an anchor in the REO Fiesta Mall Mesa, AZ in BACM 2005-3. Formerly a Macerich asset.

OfficeMax to move headquarters to Florida

Currently headquartered in Naperville IL in the OfficeMax Headquarters building on Shuman ($49mm, MLMT 2007-C1, maturity date=7/1/2017, 100% occupied by OfficeMax) announced plans last month to relocate to Boca Raton. Some jobs may stay behind, but I'm guessing not for long.

The loan represents 1.75% of the deal.

OfficeMax Headquarters

The building is pretty decent if anyone is shopping. It was built in '86, renovated in '06, and has over 354k square feet. The sole tenant is paying $13.6 psf in rent, much lower than the average $17 psf for Naperville, and also lower than a competing newer office on the same street with space currently offered at $15.50 psf.

Stuyvesant Town/Peter Cooper Village

Dear readers,
What is the latest on this one? Go ahead, post anonymously, just curious. Something gave me the suspicion that something is going on over there.

Also, I checked our analytics just now to see if anyone had stuck with us even though posting volume has been diminished in recent months due to actual work, and was surprised to see it wasn't down as much as I expected. So, thanks.

The Troubled Ghosts of Christmas Past

A recent Reuters article highlighted two legacy CMBS loans that had been worked out of their former deals, came back to the market in New Issue deals only to be kicked out for their past transgressions.

In a mid-November deal:

One shopping mall-related US$47.5m loan from the US$1.1bn GSMS 2013-GCJ16 conduit - a refinancing of a maturing loan in an earlier deal - was kicked out of a new CMBS that priced in early November.
Questions arose about how the borrower renegotiated the new terms via a discounted payoff (DPO) of the old loan, and whether the servicer extracted the most recovery value for investors in the old deal

 And in another deal a week later:

Last week, meanwhile, the ninth-largest loan in a mixed-use commercial real estate (CRE) pool, also a refinancing of a troubled maturing loan, was removed from the US$873m MSBAM 2013-C13 conduit two days after launch but prior to pricing.
Sources said there were disclosure issues regarding the servicer selling the older loan to an investor who conducted a DPO and extracted a higher value for the underlying property than what the servicer had got.

Eminent Domain idea spreading

Robert Hocket, a supporter of this idiotic idea, stated last week that 20-25 municipalities in approximately 11 states (including CA, NJ, WA, OH, NY, and FL) are looking into using eminent domain to seize and rework mortgages.

He also recently wrote a paper about the idea, ironically titled "Paying Paul and Robbing No One", that a muncipality can simply force a lender (the MBS trust in this case) to accept less than the face value of a loan, and then give the borrower a break on the balance. The theory being that because the borrower is underwater, he deserves a break - while in the real world, most of us would ask him to post additional collateral if we were the lender.


Richmond CA, the first mover, has already sent offer letters to buy loans to Trustees and Servicers. A Federal judge ruled that the second suit surrounding this particular city's effort is too early to call. The Trustees' suit highlights that the purported goal of MRP is to make the loans more affordable, but modifying into current rates would actually force payments 19% higher, therefore making them MORE likely to default. Of the 624 mortgages MRP has offered to buy, the vast majority are CURRENT on their payments, 63% were originally cash-out refis, 53% have already received modifications (average payment is $1499 and average WAC is 3.05%), and losses to the MBS Trusts that Fannie Mae owns would total $17mm.

The best quote so far is from the mayor of Richmond CA, Gayle McLaughlin, who said  “We are offering to take the loans for fair market value and that’s what this is all about. To threaten redlining to our community, when they have already suffered clearly massive injustices, it’s just setting us
back.” She is offended that lenders have basically said we won't lend in your city anymore (i.e. redlining) if you don't honor lending contracts in your city anymore... mmmmkay.

*most of this is taken from a few BBG articles, except where stated otherwise. Sorry no links.

Blockbuster death knell continues as remaining physical stores close

They have 300 stores remaining in the U.S. and they're closing all of these down. The best takeaway from the article is the quote from the CEO:

"consumer demand is clearly moving to digital distribution of video entertainment,"

 Yeah, it isn't "moving" it has "moved". What he fails to realize is that the movement is also away from cable and satellite providers such as DISH (the parent company of Blockbuster) as well. Roku and Apple TV products are letting people completely unhook.

Our household unplugged our DiSH a little over a year ago, and now instead of seeing what is on or recorded, we get to flip through a broad menu of options to choose from - want to watch the entire series of The Walking Dead in a single day? No problem, you can watch the first three seasons on the Amazon Prime channel for FREE (this channel is free if you already have Amazon Prime, which we do for other reasons) or on NetFlix which costs $7.99/mo, the current season costs around $15 or you can wait til post-season and its free too. Want to watch virtually any sitcom - Hulu, free. We spend around $40 per month now on streaming TV, mostly for premium content (i.e. HuluPLUS - $7.99/mo, more episodes are available with Plus; Netflix) and movies on demand (even ones in the theatre right now). Movies on demand that are out on Redbox (which has a channel on Roku) are a $1-2 more than at the physical location, but you spend multiples of that in time and gas, so net savings - plus many of those movies are also on other channels for free.

Sorry for the mission creep. Most of the Blockbuster stores that are closing are small corner retail stores and outparcel units in strip centers. Some common uses that have popped up since the bankruptcy has been pawn shops (i.e. LaFamilia in FL), cell phone retailers (for half, or less, the footprint), Game Stops, medical (i.e. freestanding emergency rooms, minute clinics, etc.), and restaurants. There is a blogger in Atlanta who has documented many of the stores' transitions there that is worth a quick peek.

Tax Question

I know I'm behind on posting, and I'll get back on it ASAP.

Important personal question I want to put out to the masses. I filed my taxes on October 15th, but failed to send in the check. I realized it pretty quick and remedied that, but they slapped with interest that amounted to 30% and 36% annualized, on the balance. I think they're going to give me a pass at the end of the day, but my question is... How can the state Department of Revenue charge a 36% interest rate when the same state's Statutory Maximum Interest Rate under their usury statute is 16%?

Surely someone has brought this up before, and I don't have a lot of experience being late on my taxes, so what's the catch?

UPDATE: The IRS does this as well, apparently. The interest rate for filing late is 5% per month, or  79.6% annualized. This seems like it would violate every states' usury law, and is extremely harsh. I'm sure it normally gets negotiated, by is it legal?

Hilton IPO

Blackstone filed for a $1.25 billion IPO on Hilton. This would be used to "pay down debt" according to the Bloomberg article that is out today, but is a drop in the bucket compared to the $9 billion senior mortgage that was structured in 2010 with a piece in BALL 2010-HLTN, and another ~$10 billion in mezz debt done at the same time. Previous Hilton stories can be found here.

Bloomberg also notes that Blackstone has had two other IPOs in the past year: SeaWorld Entertainment Inc ($807.3mm, April - up 6%) and Pinnacle Foods Inc. ($667mm, March - up 35%).

How will a lender ever do business in Richmond CA again?

It was reported yesterday that Richmond California has approved the plan to use Eminent Domain to condemn underwater mortgages. ZeroHedge.com has the best review.

We've discussed it in detail previously but the most obvious negative impacts boil down to:

• Lenders will likely flee the market now that the City has created a new law effectively nullifying centuries of contract law. I certainly would not write a mortgage in a municipality that would invalidate it because the collateral value had declined (shouldn't the borrower post MORE collateral in this case?)
• Borrowing costs to individuals are likely to increase dramatically if any lenders remain in the market. The risk to the Lender just went through the roof, they're going to require compensation to offset the risk. This may come through a rate increase or some innovative product such as a home price protection swap or insurance (not mortgage insurance, but systemic price protection "insurance").
• The risk extends to the city and will make it very costly to borrow money at the municipal level. As the Zerohedge article highlights, this has already happened - the city is going to be mired in lawsuits for decades, but somehow has failed to see the future despite a suit already filed in district court with the first motion hearing next week.
• The ripple effects will damage home prices in the city substantially. The first person who wants to sell their house will discover that there are no buyers (unless they're all cash) because there are no lenders. The lower home prices will likely cause the city to try to condemn additional mortgages as it slowly amputates whatever remaining value there is in the local housing market.

LBUBS 2007-C2 AM Shortfall, AJ losses

You'll recall this deal is the one where Orix liquidated a large portion of problem loans at one time last month, creating a boon for credit IOs, but wiping out all the bonds up to the AJ, and 10% of the AJ itself.

This month, shortfalls were back (obviously) and ate into the AM class and undercollateralization led to additional losses to the AJ. Barclays was out with a note that highlighted that the AJ interest shortfall was likely to be permanent at this point.

JPMCC 2008-C2 - The Promenade Shops at Dos Lagos

This $123mm loan finally liquidated after going delinquent the same year it was sold to the market in JPMCC 2008-C2, resulting in a >100% loss and wiping out 12 tranches in the process. The property sold for $29.7mm in gross proceeds, but that was only enough to cover the servicer advances, selling costs,  and a portion of the ASER. The remaining $10.8mm of ASER was left unpaid.

Barclays has an execellent summary out about it with links to the other big losses in recent months, Silver City Galleria and Tri-County Mall.

For previous stories we wrote on this deal, click here.

And, yes, because this JP deal wins the worst CMBS Deal Evah award, we will once again display an image of JP Morgan's namesake expressing his feelings about the loan.

When I find the originator at my bank who made this loan, I'm going to gut his belly open like the pig he is (exhibits thrusting motion of knife at hip level) and place his head on a pike out front of the office.   -misattributed to J.P. Morgan

Gansevoort Park Avenue hotel receiving criticism, threats to shut off its liqour license

This is important because it's a big pari passu CMBS loan in CGCMT 2012-GC8 and GSMS 2012-GCJ9.

More importantly they allegedly have naked girls and 24/7 parties at the pool on the roof, and we're sending someone over pronto to confirm this activity.

As reported by CBS .

SEC Investigating S&P for 2011 Ratings Snafu

As you'll recall, back in 2011 S&P abruptly pulled ratings from a new issue deal citing "discrepancies in how its methodology was being applied". Then they were radio silent for a year before meekly announcing that the discrepancy was insignificant and they were back to rating deals.

Bloomberg has an article out today that "three people with knowledge of the matter" said that the SEC is investigating how S&P rated a certain CMBS in 2011. I think we can all guess which one that was.

This latest inquiry is separate from the 2/4/2013 suit brought by Justice Department against S&P, which is focused primarily on resi deals from 2004 - 2007.


**Update** For whatever reason two robo-users have chosen this one post to spam with unwanted content in the comments section. It waste a ton of my time deleting them everyday so I'm closing the comments on this one post and reporting the two users. It goes against my general rule of allowing any comments to come in, and not making any changes to posts - even if I make an error I'll leave it, or at least acknowledge it, and then include an updated statement. However, I'm not going to let a robot take over the comments section either. What an arsehole.

Extended Stay Hotels - It's baaack!

Some of the largest belly flops following the Great Recession were in the Hotel sector, and interestingly, we're seeing two of those spectacular failures come back into the market this month. Red Roof Inn is out in a new issue deal (which we will publish an update on as soon as it prices), and Extended Stay was in the WSJ this morning as it filed for an IPO.

You'll recall Extended Stay, a 680 property hotel chain, was purchased by Lightstone for $8 billion, went through Chapter 11, and was picked up by Centerbridge/Paulson & Co/Blackstone for $3.9 billion in 2010. The current owners have approximately $3.6 billion in debt part of which is in a 2010 deal.

In the original CMBS loan default, everyone sued everyone - even the special servicers involved ended up suing each other. We posted numerous updates about it as it played out. The potential buyers sued, the creditors sued, the Fed owned a big chunk via Bear Stearns... it was ugly. Of course, the day it first showed up in a deal many CMBS players were scratching their heads wondering how the deal got done in the first place.

Orix liquidations wipe out 10% of LBUBS 2007-C2 AJ

This is the second AAA class in CMBS to experience a loss to-date, and it certainly won't be the last. It also wiped out the B - K classes, paid back interest shortfalls as far down as the K, and paid off A2, AAB, and portions of A3 and A1A.

h/t CrabsofSteel