CRED iQ’s WAR (Weekly Asset Review) Report – July’s Auction Valuation Guidance

CRED iQ’s updated valuation guidance for five assets that are in special servicing and slated to be sold this month by way of auction.

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This week, CRED iQ calculated real-time valuations for 5 distressed lodging and retail assets that we expect to be sold in July. The CRED iQ valuations factor in a base-case (Most Likely), a downside (significant loss of tenants), and dark scenarios (100% vacant). For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.

Homewood Suites – Lansdale

170 keys Extended-Stay Hotel, Lansdale, PA 19446

This $13.7 million loan transferred to special servicing on March 4, 2015 due to delinquencies leading up to its May 6, 2015 maturity date. Special servicer LNR acquired title to the property in 2019. The property is an extended-stay hotel that operates as a Homewood Suites through a franchise agreement with Hilton that expires on May 22, 2022. The hotel is in need of a lobby renovation that could cost approximately $430,000 and a change-of-ownership Property Improvement Plan was quoted at $6.8 million, or $40,000 per key.

Demand for the property was primarily sourced from Merck, which operates a manufacturing facility adjacent to the property and is a major employer in the area; however, the pharmaceutical company laid off 600 local employees in 2014 and cut another 500 local jobs in 2019. NCF was negative for the property in 2020. A sale of the property is expected by the end of July. For the full valuation report and loan-level details, click here.

Springhill Suites – Willow Grove PA

155 keys Limited-Service Hotel, Willow Grove, PA 19090

This $11.4 million loan transferred to special servicing on April 14, 2017 due to delinquency. Special servicer LNR acquired title to the property in 2019. The hotel operates as a SpringHill Suites by Marriott through a franchise agreement that expires in 2027. The franchise agreement has 2, 10-year extension options but also has a termination fee. Two additional Marriott-branded hotels are in the immediate vicinity, including 108 keys for a Fairfield Inn & Suites that was constructed in 2016 on an adjacent parcel, just prior to the SpringHill Suites transfer to special servicing. A Property Improvement Plan will be required upon change of ownership. Occupancy averaged 18% in 2020 and the hotel had negative NCF for the year. Hospitality Real Estate Counselors (HREC) has the sale listing and will auction the property at the end of July. For the full valuation report and loan-level details, click here.

Courtyard By Marriott – Shawnee

90 keys, Full-Service Hotel, Shawnee, KS 66217

This $7.0 million loan transferred to special servicing on April 29, 2020 due to historical cash flow struggles. The loan is secured by a full-service hotel that operates as a Courtyard by Marriott and primarily competes with four other hotels located off Exit 5 of the Interstate 435 loop around Kansas City, MO. Although distinguishable by its brick veneer, the hotel is the second-oldest of it competitive set. The three newest hotels with a total of 256 keys came online between 2014 and 2016 and were the primary cause of operational struggles. Pre-COVID, the property averaged 70% occupancy in 2019 but only had NCF of $151,000. Carry costs and expenses outweighed revenues in 2020.

Foreclosure has been initiated and receivership is in place, but the borrower is permitted to sell the property. The special servicer, Midland Loan Services, stated plans of an auction of loan via a note sale on the Ten-X platform. For the full valuation report and loan-level details, click here.

Bel Air Center

32,200-sf Retail Strip Center, Roseville, CA 95661

This $5.2 million loan transferred to special servicing almost six years ago due to maturity default. The maturity default was related to an ongoing issue related to on-site tetrachloroethylene (PCE) contamination from a drycleaner tenant. A small strip center that is shadow-anchored by a Bel Air grocery store collateralizes the debt. Receivership has been established and an environmental engineering firm has been retained for further testing and remediation plans. The special servicer has postponed a foreclosure sale multiple times and has opted for a note sale via auction. Interested parties may want to pay close attention to the property’s Environmental Site Assessment reports as remediation of PCE contamination is a costly endeavor. For the full valuation report and loan-level details, click here.

High Ridge Center

260,664-sf Retail Center, Racine, WI 53406

This distressed property with an associated balance of $9.6 million has been REO for over five years since LNR acquired title on February 12, 2015. The property is a nearly vacant retail center save for a 111,493-sf Home Depot with a lease that expires on April 30, 2023. Home Depot appears to have paid $743,000 in base rent during 2020. We anticipate the property to hit the auction circuit at the end of July. For loan-level details, click here.

About CRED iQ

CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. For full access to our loan database and valuation platform, sign up for a free trial below: