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Bon-Ton’s Liquidation Raises Default Risk on $1B in CMBS Loans 

Morningstar Credit Ratings’ latest CMBS Alert details roughly $1.01 billion of loans in 34 commercial mortgage-backed securities (CMBS) that have significantly elevated risk of default or further deterioration in value, following liquidators gaining control of Bon-Ton’s assets in an auction last month. Of particular concern are nine properties, which back $601.6 million in 11 CMBS loans, where Bon-Ton’s departure is likely to cause even more distress because of the loss of multiple anchor tenants.

Although Morningstar points out mall owners such as Simon Property Group, Macerich, and GGP have the capacity to invest in redeveloping properties, the latest Bon-Ton challenge may lead to lower-quality malls in poor locations being divested in order to focus on higher-quality properties. Morningstar believes mall owners could have opportunities to reuse or redevelop vacant boxes in stronger markets, while stores in secondary locations may struggle to find new tenants.

The easiest way Morningstar suggests repurposing Bon-Ton’s spaces would be to lease them to other department stores. However, that may prove to be problematic since none of the major U.S. department stores are looking to grow right now. Ultimately, property owners may be forced to break down vacant anchor stores into smaller spaces, or bring in nontraditional tenants like charter schools, offices, or surgical centers.


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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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