Some people go to Atlantic City with a fistful of quarters and dreams of instant wealth. Others go down there apparently with a fistful of quarters hoping to come home with the Pier at Caesars.
According to September special servicer commentary, recent bids have come in below the latest appraised value of $5.5 million. Nonetheless, the special servicer is still reviewing those offers and is in discussions with potential buyers.
The property backs an $80.5 million Pier at Caesars loan that represents 11.3% of MSC 2007-HQ13. The property was put back on the sales block in June. Since then, several Atlantic City casinos have closed which has to be weighing on the valuation of the Pier. In addition to decreased traffic in Atlantic City, the property saw business suffer after Hurricane Sandy hammered the area.
Constructed in 2004, the property contains over 300,000 square feet of retail space. The loan was appraised for $187.5 million in 2007 on an “as-is” basis and also carried a pro forma value of $210 million. Special servicer notes indicate that the property is 52% occupied, down from 80% in 2008 and 55% in early 2013. Most tenants are paying a percentage of sales rather than fixed rent due to violation of co-tenancy clauses.
This is not the first time the property has been offered for sale. The retail center was shopped via Auction.com in 2012 and garnered a bid of over $25 million. However, that was below the reserve price at the time. Past special servicer notes have indicated “that a stabilization effort may cost in the tens of million dollars.”
At this point, appraisal reductions and servicer advances total almost $7 million, so a loss of over 100% is all but certain.
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