KBRA Places Ratings for Six Classes of CG-CCRE 2014-FL1 on Watch Downgrade

KBRA places the ratings of six classes of certificates for CG-CCRE 2014-FL1 on Watch Downgrade pending the outcome of a modification and extension of the loan which is currently being negotiated between the special servicer and the borrower. The watch action also reflects the sponsor’s inability to refinance the loan at its extended final maturity in March 2024, along with a continued decline in KNCF and value. The classes placed on Watch are susceptible to interest shortfalls from special servicing fees and other trust expenses, and likely to have a heightened risk of potential principal losses, as the special servicer works to resolve the loan.

Yorktown Center is collateralized by the borrower’s fee simple interest in 645,179 sf of Yorktown Center, a 1.4 million sf retail complex located in Lombard, Illinois, approximately 19 miles west of the Chicago CBD. The loan has an outstanding aggregate principal balance of $120.5 million, including a pooled component balance of $107.4 million, and $13.1 million of non-pooled junior participations. The anchors include JCPenney (238,668 sf) and Von Maur (190,000 sf), each of which owns their improvements and underlying land. Additionally, the asset is shadow anchored by a Target and a 500-key Westin hotel and Convention Center, both of which are located adjacent to the subject and accessible via the Yorktown Mall’s ring road.

The loan originally transferred to the special servicer in October 2018 for imminent maturity default prior to its March 2019 maturity. It was subsequently modified to extend the final maturity date to March 9, 2021, subject to debt yield tests and a cash flow sweep provision. The loan returned to special servicing on May 13, 2020, for monetary default, after which a third modification was finalized extending the loan maturity date to March 2023 with an additional one-year extension option. The third modification also permitted a full equity transfer from KKR (previously 95.0% ownership) to Pacific Retail Capital Partners (previously 5.0% ownership) and $30.3 million in outstanding mezzanine debt was forgiven in full. After the loan failed to pay off in March 2024, it transferred back to the special servicer and its status is performing matured balloon. For the nine-month period ending September 2024 the servicer reported a DSC of 0.71x, down from 0.92x for the FY 2023, and from 3.76x at closing. For the same period, the property was 78.0% leased, in line with 77.0% for FY 2023 and down from 91.8% at issuance. The most recent all-in KLTV for the loan was 161.6%, as compared to a KLTV of 100.9% at issuance.

Given the high in-trust KLTV and challenges facing regional malls in general, a refinance of the loan in the short term is unlikely without additional equity from the borrower. According to the servicer, the borrower has requested that the loan be extended through a modification which is currently under review and may include a paydown of the loan. The sponsor, Pacific Retail Capital Partners, recently announced the addition of several new restaurants opening at the subject property in 2024, including Dave & Busters, Tapville Brewery, and Popeye’s Louisiana Kitchen. Additionally, according to the servicer, the property is currently under construction with Phase I, which includes the demolition of the former Carson’s anchor store, already underway. When complete, the fully redeveloped property will include over 700 residential units and a 3+ acre community park. Phase one of the project has an anticipated completion date of summer 2026.

KBRA maintains the loan’s KBRA Loan of Concern (K-LOC) designation and its KBRA Performance Outlook (KPO) of Underperform, due to declining performance. KBRA will continue to monitor the transaction and the performance of the loan, effectuating additional watch placements as necessary, and will seek to resolve the Watch Placements over the next 90 days.

Details concerning the classes with rating changes are as follows:

To access ratings and relevant documents, click here.

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