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Palm Beach Center Liquidated at Over 100% Loss

JAN 9, 2014 12:22pm ET
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A Palm Beach Gardens, Fla., property which backs a securitized $30 million mortgage sold for only $5.6 million, according to local media reports.

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.

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