Struggling SoFla retail market faces $6B in CMBS payments

South Florida’s hotel industry also faces $4B in CMBS debt

Clockwise from top left: 10800 Pines Boulevard, 701 Lincoln Road and 8888 Southwest 136th Street (Credit: Google Maps)
Clockwise from top left: 10800 Pines Boulevard, 701 Lincoln Road and 8888 Southwest 136th Street (Credit: Google Maps)

As South Florida’s shuttered retail market struggles due to the coronavirus pandemic, the industry faces billions of dollars in commercial mortgage-backed securities debt coming due.

South Florida’s retail market has an outstanding CMBS loan balance of $6.3 billion, according to data provided by Trepp. It is the third highest CMBS exposure of any metropolitan statistical area after New York City and Los Angeles.

A number of South Florida retail properties could fall into default or could be taken over by other operators, according to industry experts. Unlike conventional loans, CMBS loans are much tougher to negotiate, and mortgage payments are harder to defer to a later date.

Some of the retail properties in South Florida on Trepp’s watch list for a possible default include:

  • The Falls, a regional mall at 8888 Southwest 136th Street in Kendall, has $70 million in outstanding CMBS debt.
  • A retail property at 701 Lincoln Road in Miami Beach, owned by an entity tied to Michael Comras of Comras Company and leased to Forever 21, has $14 million in outstanding CMBS debt.
  • Boulevard Square, a shopping center at 10800-11500 Pines Boulevard in Pembroke Pines, has about $44.2 million in outstanding CMBS debt.

Across South Florida, non-essential businesses, including retail stores, were forced to close in March, leading malls to shut down and employees to be laid off.

In addition to the retail market, South Florida’s hotel industry has to meet $4.2 billion in CMBS payments, Trepp’s data shows.

CMBS loans are secured by a mortgage on a commercial real estate property. The loan is accumulated into a pool of loans and sold as bonds to investors. When the borrower misses a payment, CMBS loans are taken over by a third-party firm known as a “special servicer” that can then end up operating the property or reworking the deal with borrowers.

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This month, more than $8.5 billion of retail and hotel single-borrower loans have already been transferred to special servicing, according to DBRS Morningstar.

While CMBS loans are often deemed riskier than conventional loans because of the difficulty in modifying them due to the obligations with bondholders, some industry experts say that borrowers can still gain forbearance on loans.

“You are still seeing lenders in the CMBS world [that] are very willing to work with borrowers and will give them time,” said attorney Lee Mackson, a partner in the Miami office of Shutts & Bowen LLP, who is chair of the firm’s bankruptcy practice group.

The terms on CMBS are also stricter than conventional loans regarding taking on new debt and refinancing the property.

“CMBS loan documents prohibit [a borrower] from getting additional debt,” said attorney Suzanne M. Amaducci-Adams, a partner of Miami-based Bilzin Sumberg, who focuses on real estate and leads the firm’s hospitality group.

Somes retail-related loans are already heading into special servicing. In New York, a CMBS loan on one of the largest malls in the country fell into special servicing. The $388.5 million loan on the 2.2 million-square-foot Palisades Center in West Nyack, New York has been transferred to special servicing because of imminent monetary default, Trepp reported.

More broadly, outside of the CMBS market, landlords and lenders are trying to figure out how to handle the crisis. The federal government has offered relief to small business owners through the $2 trillion stimulus package, but some landlords are still required to pay their lenders. Meanwhile, national tenants such as the Cheesecake Factory have told their landlords they are not paying rent in April, creating a strain in the relationship between landlords, tenants and lenders seeking mortgage payments.