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Toys ‘R’ Us Store Closings Create $500M CMBS Risk
Toys ‘R’ Us’ plan to close up to 182 stores puts 20 Commercial Mortgage-Backed Securities (CMBS) loans with a collective allocated property balance of $500.2 million at risk. Research by Morningstar Credit Ratings identified the loans where the retailer’s closing will lead to a significant drop in occupancy.
In total, 40 CMBS loans, with a combined allocated property balance of $1.47 billion, have exposure to Toys ‘R’ Us stores slated for closure, but Morningstar Credit Ratings believes that the remaining 20 loans aren’t expected to experience a significant decline in net cash flow because the retailer doesn’t represent a large portion of the gross leasable area.
Of these 20 CMBS loans, two have balances of more than $56 million, including The Plant at San Jose and Akers Mill Square loans. Morningstar notes, these are not at risk of default or material value deficiency because the properties are in strong markets and the space should be re-leased quickly.
Toys ‘R’ Us has 212 locations backing CMBS loans with an allocated property balance of $3.68 billion, according to Morningstar.
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