Since February 2009 when the PGA Design Center loan was placed in special servicing, the property’s value started to drop.
“Hampered by the bankruptcy of primary tenant Robb & Stucky and the inability to change the property’s zoning as a furniture showroom,” explains in a report Keerthi Raghavan, an analyst with Barclays, the property received “a nonrecoverable determination in April 2013.”
As a result sales proceeds of $5.6 million were lower than the most recent appraisal in March 2013 that valued the property at $9.8 million and are expected to lead “to a full writedown of the principal.”
The new losses will add to the $800,000 in losses accrued so far and “will wipe out most of the J tranche.”
After taking into account selling costs, fees and other repayment advances, analysts’ calculations indicate repayments could amount to anywhere from $2 million to $2.5 million of the $3.3 million of ASERs and $1.4 million in nonrecoverable interest due.
Repayments could be enough to pay back interest shortfalls on the outstanding bonds (F-J tranches), but analysts see “a small chance” there will be excess reimbursement cash flows remaining after that.
These principal losses will reduce the bond enhancement to 9.1% from 10.3%, according to the report.