Nearly $42M in CMBS at risk in GameStop store shutdown: Morningstar

GameStop's plan to shutter up to 200 stores could adversely affect commercial mortgage-backed securities loans with a combined allocated property balance of almost $42 million, according to Morningstar Credit Ratings.

A team of analysts from the company and its recently acquired DBRS subsidiary identified the loans as most at risk based on either their low debt-service coverage ratios, the low occupancy rates of their collateral properties, or the fact that they were within five miles of another GameStop store.

Daniel Acker/Bloomberg

"Morningstar Credit Ratings LLC (DBRS Morningstar) believes that GameStop Inc.'s impending store closures could adversely affect already underperforming retail properties even though the risk to commercial mortgage-backed securities with exposure to the retailer are minimal," the analysts said in a report published Monday.

GameStop hasn't identified which stores it will shut. As it continues to close locations to address worse-than-expected sales projections, it's likely it will target ones with the aforementioned characteristics.

The video game retailer is one of the five largest tenants in 112 properties that serve as securitized commercial mortgage collateral with an allocated balance of more than $383 million.

Within that population of loans, 49 commercial mortgages with a combined allocated balance of over $147 million are backed by collateral properties close to another GameStop location. However, many of these properties have a mitigating characteristic that could help preserve performance if a store closes.

"In most instances, the risk is offset by the retailer's relatively small space with only four stores comprising more than 20% of the gross leasable area," the DBRS Morningstar analysts noted.

The five largest loans analysts identified as at-risk have balances ranging from $3 million to almost $7 million.

There are currently in excess of 3,700 GameStop stores in the United States.