120% loss on Vegas Mall triggers payday for Icahn’s big court

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A loan tied to a besieged mall outside of Las Vegas recorded a 120% loss after the mall sold for roughly the same price as a condo.

The loan, which had a current balance of $ 62.2 million, was fully written off after the Prizm sockets were liquidated for just over $ 400,000, according to Bank of America Corp. Taking into account $ 11.5 million in fees and reimbursements owed to the duty master for the advances made, the total loss realized was $ 74 million.

This is the biggest loss – both in terms of dollar amount and percent of the original loan balance – for a commercial mortgage-backed conduit loan since the 2008 financial crisis, Bank of America analysts Alan Todd, Mao Ding and Graham Voss wrote in a May 21 report.

This is a rationale for traders betting against retail using the so-called CMBX 6, a commercial real estate credit derivatives index with high exposure to malls and shopping malls. This is the first payout to those who bypassed the index, including billionaire investor Carl Icahn.

“We believe these mortgages will have the same dire fate as the mortgage-backed securities during the 2008 debacle,” Icahn said in a statement. interview this week with Bloomberg’s Scott Deveau.

Read More: Vegas Mall Losing 95% Of Its Value May Be Just The Start

Betting on the disappearance of retail was a popular short film that soured in recent years as shopping centers have been able to survive. But fortunes have turned amid last year’s pandemic lockdown orders. People stayed home and shopped online, exacerbating an existing threat to physical stores. Even after many states allowed retailers to reopen, buyer traffic remained low.

The so-called liquidation proceeds from the Primm, Nevada Mall, formerly known as Fashion Outlets in Las Vegas, was about $ 402,000, roughly the cost of a luxury condominium near the strip. It is even less than the Hammer price of $ 1.525 million initially settled in January.

“The May 2021 service data released indicates that the asset was resolved with a larger-than-expected loss,” commercial real estate data firm Trepp said in a May 18 report. Neither Bank of America nor Trepp have indicated who the buyer was, but Kohan Retail Investment Group, based in Great Neck, New York, now lists it as one of its company-owned properties. website.

Prizm stores were valued at $ 28.2 million less than a year ago and $ 125 million in 2012 when the loans were bundled into a mortgage-backed trade title. The two lowest-ranked tranches of the CMBS deal’s capital structure were completely canceled this month following the liquidation, Bank of America said. The upper tranche, initially rated in the BB range, has been partially impaired.

The AAA rated parties to the CMBS transaction had retained their ratings until February, when Moody’s Investors Service lowered one of the three brackets by two levels. At the time, Moody’s said it expected a loss of more than 100% of the current loan balance.



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