Newark Hotel Goes Delinquent for the First Time & PA Mall Sent to Special Servicing

The $54 million Sheraton at Newark loan went 30 days delinquent for the first time this month according to servicer data. The loan has fluctuated between current and in the grace period since securitization in 2006. The note is due to mature in July 2016 and currently backs 2.4% of JPMCC 2006-CB17.

The 12-story, 505-room, full-service hotel Sheraton at Newark is actually now a Double Tree Hilton that has under-performed according to WatchList commentary. DSCR for the first three quarters of 2013 came in at 0.80x on 67% occupancy , consistent with 2012 and 2011 levels. The as-is appraised value at securitization was $76 million, while the underwritten “stabilized” value was $84 million. Switching from Sheraton to Double Tree has improved revenue and occupancy, but the hotel still falls below the market averages according to commentary.

The JPMCC 2006-CB17 deal now carries a 24.2% delinquency rate and 21.7% of its collateral carries appraisal reductions. The sum of the appraisal reductions total 10.4% of the collateral balance as of February. Interest shortfalls reach the B class and losses have totaled 1.7% to date.

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According to a note from Fitch last week, the $36.5 million Morgantown Crossing loan is on its way to special servicing due to imminent default. The pro forma loan backs 0.9% of CGCMT 2007-C6, which currently carries 13.44% delinquency and 1.4% in cumulative bond losses through the February remittance.

Morgantown Crossing is a 401,479 square-foot mall in Elverson, Pennsylvania–a suburb of Philadelphia. The $36.5 million loan was underwritten in 2007 to a DSCR of 1.14x, although the “un-adjusted” level was actually 1.01x. Further, the underwritten LTV was 77% relative to the “un-adjusted” LTV of 86.7%. The mall counts Walmart, Lowes, and Auto Zone among its top tenants, but the property still hasn’t cracked the 1.0x DSCR threshold over the last three years. Despite the poor financial performance, the loan has remained current.

The 2007 appraised value was $42.1 million. Interest shortfalls reach the G class in CGCMT 2007-C6 and 13% of the collateral balance carries appraisal reductions.

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