Recent activity surrounding a loan that backs Glades Plaza and the Commons at Town Center shopping complexes in Boca Raton is showing investors skittishness towards retail properties. The Wall Street Journal reported that days before JPMorgan Chase was scheduled to issue $1 billion of commercial mortgage-backed securities, it removed the $49 million loan issued by Ladder Capital Finance earlier this spring to help Woolbright Development pay off $44.8 million in debt it had on the properties.
Underwriters tend to remove loans from issues when investors raise concenrs about the credit quality behind the loan, the Journal said. The properties, on opposite sides of NW 19th Street in Boca Raton, were brought to 97 percent occupancy from 54 percent in 2009.
But with the retail sector generally suffering from high vacancy rates thanks to the economic downturn, the closure of chains and the increase of online shopping, investors are increasingly wary of retail properties. Moody’s also recently reported that the loan-to-value ratio of retail properties has been rising.
Those realities combined with the 183,000-square-foot properties’ history of instability explain why it was removed from next week’s CMBS issue. [WSJ]