Loan on Jacksonville retail center may go bad

Morningstar expects the $46 million loan to default when it matures in May 2017

Jul.July 17, 2016 02:30 PM

Morningstar Credit Ratings, LLC, reported that a $46 million loan secured by a Jacksonville shopping center is likely to default when it matures next year, following a department store’s departure.

Morningstar reported July 13 that “the highly leveraged $46 million Roosevelt Square loan will likely default at its May 2017 maturity because of the collateral’s low occupancy and declining net cash flow.”

Refinancing initiatives are complicated by a decision by the Charlotte, North Carolina-based Belk chain of department stores to vacate its location the Jacksonville shopping center.

Payments on the $46 million loan are current, but they haven’t always been.

After more than three years of special servicing due to delinquency, the unmodified loan was returned to the master servicer in 2014.

However, the loan has remained on a Morningstar Credit Ratings watch list “because of consistently low NCF [net cash flow],” Morningstar said in its July 13 report.

“Based on our evaluation, the collateral value is nearly one third below its original appraised value,” the credit rating agency said. “Even if the property is able to achieve occupancy of 88 percent in two years … the loan will face substantial refinance risks, as the sales comparables are not encouraging.”

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