Return to Lender: Week of Oct. 12, 2023

• A San Francisco Superior Court judge has appointed a receiver for the Westfield San Francisco Centre in response to a lawsuit last month requesting the move filed on behalf of the lenders of Westfield’s $558-million defaulted mortgage, according to the San Francisco Business Times. Superior Court Judge Charles F. Haines has appointed Gregg Williams of Trident Pacific to take possession, custody and control of the mall. 

• Also in San Francisco, locally based The Prado Group acquired the loans behind a portfolio of more than 300 apartments owned by Veritas Investments. The Prado Group bought a mortgage portfolio tied to a 20-building, 304-unit portfolio of San Francisco apartments from Veritas’ lender, an affiliate of New York-based Mack Real Estate Credit Strategies, in a deal that closed at the end of September, the San Francisco Business Times reported. Documents recorded with the San Francisco Assessor’s office don’t include the exact price Prado paid for the $124 million in loans tied to the portfolio. 

• Bloomberg News reported that S&P Global Ratings is considering cutting Brookfield Property Partners to junk status due to “substantial” amounts of maturing debt to refinance during a time of higher interest rates and lower property values. S&P had cut Brookfield Property’s issuer credit rating to BBB-, one rung above junk, in July 2021. The rating agency has placed it on credit watch with negative implications, with a 50% chance the rating could change within 90 days. “The CreditWatch placement reflects the company’s deteriorating interest coverage metrics, continued secular challenges facing the company’s office properties, and a capital structure with a material amount of near-term, floating-rate debt,” wrote S&P analysts Michael Souers and Ana Lai. 

• The PacStar Retail Portfolio ($43.0 MM | 4.1% of MSB14C19) reported a new appraised value of $25.7 million as of July 2023, a 20% reduction from the previous appraisal in November 2022. The Pac Star Portfolio is secured by two retail properties: the Yards Plaza in Chicago and Willowbrook Court Shopping Center in Houston, according to Morningstar. The loan is 90-plus days delinquent and has been special serviced since October 2021. Early stress on the loan stemmed from the Toys R Us (15% GLA), bankruptcy in 2017, but has evolved into a legal battle.  

• A lender has seized the project site for a 1,032-unit residential development in Oakland through its foreclosure on a delinquent real estate loan, reported the Mercury News. San Francisco-based Panoramic Development had proposed the housing project on a site at 500 Kirkham St., which it acquired for $7.1 million in 2017. A $6.25-million loan made to Panoramic in 2021 through CPIF California, an entity controlled by Columbia Pacific Advisors, toppled into default in March of this year, ultimately leading to the foreclosure. 

• DBRS, Inc. downgraded its credit ratings on 11 classes of Commercial Mortgage Pass-Through Certificates, Series 2017-P8 issued by Citigroup Commercial Mortgage Trust 2017-P8. Another 10 classes were confirmed at AAA, but DRBS Morningstar changed the trends on four of those classes to negative from stable. The credit rating downgrades and negative trends reflect DBRS Morningstar’s concern surrounding the increased credit risk related to the pool’s exposure to office properties, which represents 33.5% of the current pool balance, along with declining performance metrics for several other loans in the pool. 

• A lender is foreclosing on a loan tied to the Montgomery Park office complex in Portland, OR owned by Unico Properties and Partners Group, the Puget Sound Business Journal reported. In addition, Turner Construction Co. is escalating its fight to recoup what it claims Seattle-based Unico and Swiss-based global private equity firm Partners Group owed for work at Montgomery Park. The general contractor filed a $3.7-million against the Montgomery Park ownership group in Multnomah County Circuit Court on Oct. 3. Meanwhile, Unico has indicated it’s willing to hand over to a lender the keys to Seattle’s Colman Building, according to a loan servicer’s note dated Sept. 15. Unico has been working for about two years to convert the upper floors of the late-19th-century office building on the edge of Pioneer Square into residences. 

• Fannie Mae announced its latest sale of non-performing loans as part of the company’s ongoing effort to reduce the size of its retained mortgage portfolio, including the GSE’s 22nd Community Impact Pool (CIP). The one large pool includes approximately 1,555 loans totaling $217.5 million in unpaid principal balance. The CIP includes approximately 60 loans totaling $18.6 million in UPB, geographically located in the New York area. All pools are available for purchase by qualified bidders. This sale of non-performing loans is being marketed in collaboration with BofA Securities, Inc. and First Financial Network, Inc. as advisors. Bids are due on the one large pool by Oct. 31, and on the CIP by Nov. 16. 

Hear from the leaders in loan advisory and special servicing during a panel on distressed assets at Connect Investment & Finance 2023 on Oct. 24 at the Hyatt Regency O’Hare in Rosemont, IL. For up-to-the-minute insights on the state of the market and what’s next in the current cycle, be sure to attend. Click here to register.