A $40B Wall Of Hard-To-Refi Retail CMBS Coming Due

More than $40B in commercial mortgage-backed securities associated with retail properties is slated to come due over the next three years, hovering like a storm cloud over the asset class.

That was the warning United Capital Markets CEO John Devaney offered during a panel discussion at the Structured Finance Association’s industry conference in Las Vegas this week, as reported by Bloomberg.

Even next year will be a problem, Devaney said. About $13B in retail CMBS will come to maturity in 2022, and 73% of that total can’t be refinanced now; much of it is debt associated with Class-B and Class-C properties.

Retail has been in trouble since well before the coronavirus pandemic, with anchors closing at a precipitous rate and inline stores disappearing as once-popular retail brands go bankrupt. 

Even Class-A malls continue to lose anchors as legacy brands evaporate. In November, for instance, the super-regional Woodfield Mall in northwest suburban Chicago will be losing its Sears, the last store of that brand in Illinois. 

Whatever the fate of existing retail loans in CMBS, it is likely they will be less of a problem in the long run since fewer of them are now being securitized, the SFA panelists pointed out, as reported by International Financial Review.

Before the pandemic, banks had no trouble pooling retail mortgages —  along with hotel mortgages, another sector hit hard in 2020 — with office, industrial and multifamily loans to sell them as part of CMBS.

Currently, according to the panelists, investors are loath to take on much exposure to lodging and retail mortgages, considering the uncertainty about the pandemic's continuing impact on travel and consumer spending patterns, IFR reports.