Northeast Real Estate Business

MAY 2018

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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www.REBusinessOnline.com Northeast Real Estate Business • May 2018 • 33 tering a significant portion of its Aaron Brothers footprint in the coming months. While the overall CMBS impact of these closures is expected to be minimal, the top loans anchored by Aaron Broth- ers as a top 5 tenant include the $46.5 million mort- gage behind the Redlands Town Center in Redlands, California and the $18.3 million note collateralized by the Chapel Hill Shopping Center in Fort Worth, Texas (MSBAM 2014-C9) • Bachrach: Menswear retailer Bachrach an- nounced it will liquidate after the firm filed for bankruptcy for the third time on February 16. The firm has been in operation for more than 100 years. According to Michigan Live, the firm's store count dropped from 32 to 14 last year after a 2017 bank- ruptcy filing. The retailer's stores are too small to appear as a top-five tenant where they reside, but they are tenants in some large CMBS properties in- cluding the Great Lakes Crossing Outlets (GSMS 2013-G1), Westfield Southlake (LBUBS 2008-C1), and Opry Mills (split over several 2016 deals). Given the size of the stores and the strength of the Great Lakes and Opry Mills properties, this should be a non-event. • Bon-Ton: In a disappointing turn of events, word emerged on April 18 that department chain Bon-Ton will be forced to go out of business after two liquidation firms put in the winning bid to take over the bankrupt retailer's remaining assets. The firm currently manages over 200 stores under the Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's, and Younkers nameplates. Stores from these brands act as a top 5 tenant at 103 CMBS prop- erties behind $3.5 billion and 63 CMBS loans. • Brookfield Property: Brookfield Property Part- ners, which is a Toronto-based commercial real es- tate firm focused on repurposing struggling retail properties, announced the purchase of the remain- ing assets held by mall operator General Growth Properties (GGP). GGP shareholders will conse- quently receive a payout of $23.50 per share follow- ing the $15 billion takeover. The purchase price was noted to be below shareholder expectations, and has put further pressure on other REITs in the retail sec- tor. • Claire's: Claire's Stores Inc. filed for bankruptcy protection on March 19 to restructure $1.9 billion of debt from its balance sheet and close unprofitable stores. Claire's is not listed as a top five tenant back- ing any CMBS loans due to its generally smaller store size, but the retailer does have operations in a number of high-end U.S. malls. While the overall CMBS impact of Claire's potential bankruptcy is ex- pected to be minimal, any future planned closures could still contribute added pressure to property owners hit by mass closures by several smaller-sized chains. The bankruptcy process is expected to wrap up in September. • Foot Locker: Foot Locker announced that the re- tailer will be closing another 110 stores this year as part of a $230 million capital expenditure program for 2018 that involves reopening new stores and shrinking its retail footprint to increase productivity. • Nine West: Nine West Holdings, which owns brands such as Nine West and Anne Klein, filed for Chapter 11 bankruptcy on April 6 to explore strate- gic alternatives to tackle its $1 billion debt load. The firm recently won $300 million in debtor-in-posses- sion financing which would enable the firm to op- erate as normal under the filing. Thus far, the com- pany has received an initial bid offer of $200 million from Authentic Brands Group to purchase its Nine West and Bandolino business lines. • Southeastern Grocers: Southeastern Grocers — which is known as the operator of supermarket brands such as Harvey's, Fresco y Más, and Winn- Dixie — formally filed for Chapter 11 bankruptcy for the third time on March 27. According to court documents, the firm is seeking to restructure a debt load ranging from $1 billion to $10 billion in liabili- ties. Under the company's most recent reorganiza- tion plan, Southeastern Grocers has effectively re- duced its debt by $500 million and carried out the closure of 94 underperforming stores. Southeastern Grocers will continue to operate 582 stores follow- ing these store closings. Fifteen out of the 94 stores on the chopping block currently anchor roughly $71.7 million in CMBS loans (based on the proper- ty's allocated balance in the loan), with the exposure spread across 14 securitized transactions. The largest loans that contain exposure include the $8.3 million Tampa Festival loan (CGCMT 2013-GC15) and the $7.2 million Mandeville Marketplace note (CFCRE 2016-C6). Winn-Dixie (now Harvey's) occupies 32.2 percent of the 141,628-square-foot shopping center behind the Tampa community shopping center and 80.2 percent of the 75,120-square-foot neighborhood center in Mandeville, Louisiana. Servicer notes de- tail that the retailer has entered lease termination agreements at both properties. • SuperValu: Parent company Supervalu an- nounced in late March that the Minneapolis-based grocer will be selling 21 of its 38 Farm Fresh locations to competitors Kroger and Food Lion for a reported price tag of $43 million. Due to the sale of these op- erations, a dozen Farm Fresh stores and over 1,000 current employees will be affected. Farm Fresh cur- rently serves as a top 5 tenant for seven CMBS loans totaling more than $46.2 million. • Tops Supermarkets: Tops Markets LLC filed for Chapter 11 bankruptcy on February 21, citing strong industry competition and the firm's signifi- cant debt load of more than $700 million as reasons for the reorganization. The Williamsville, New York- based supermarket retailer currently operates 170 locations across New York, Pennsylvania, and Ver- mont. While the bankruptcy filing is not expected to impact the day-to-day operations of these stores for now, Tops has indicated that the firm will be re- viewing the need to close underperforming stores from its physical portfolio during the restructuring process. Tops Supermarkets is listed as a top five anchor tenant in 25 CMBS loans totaling $457.5 mil- lion and 19 securitized transactions. Loans with the largest CMBS exposure to Tops Markets include the $104 million Tops & Kroger Portfolio (COMM 2014- UBS6) and the $32.9 million Tops Markets Grocery Anchored Portfolio note (COMM 2014-UBS2). • Toys "R" Us: On March 14, the iconic toys man- ufacturer officially submitted the court motion of its liquidation plan to close all of its 700+ stores by mid- May. Toys "R" Us and Babies "R" Us are listed as a top 5 anchor tenant at 440 properties with exposure to 105 CMBS loans with a combined balance of $4.4 billion across 92 deals. Remittance data for April re- vealed that the valuation of the collateral behind the TRU 2016-TOYS deal (which is a $512 million CMBS portfolio sponsored by the retailer) was lowered to $560.7 million last October from a previous apprais- al of $878.8 million in 2016. The firm recently denied an offer from Los Angeles toy mogul Isaac Larian to purchase 274 U.S. for $675 million and 82 Canadian stores for $215 million. Catherine Liu is a research analyst with Trepp LLC. Source: Trepp Payoff Status - Last 12 Months Source: Trepp CMBS Default Rates

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