NEW YORK--(BUSINESS WIRE)--A flurry of in-line tenant store closures could further weaken some already underperforming malls, especially those in tertiary locations, Fitch Ratings says. However, the store closures are unlikely to have a significant impact on the performance of Fitch-rated CMBS transactions.
The majority of the store closing announcements made thus far in 2014 are associated with smaller sized tenants, with the exception of Macy's and JC Penney. The smaller sized tenants should not have a significant impact on overall mall occupancy, although mall operators in tertiary locations (those not in major or secondary markets) will have the hardest time re-tenanting space. Fitch already assumes higher loan loss severities in the analysis of these malls.
Recent store closures announcements have been made by Macy's (which will be partially offset by the addition of new locations), JC Penney, Sears, Walgreens, Radio Shack, Children's Place, Abercrombie & Fitch, Aeropostale, Cold Water Creek, Office Depot and Staples. However, many of these affect a relatively small portion of stores. JC Penney, for example, is closing less than 3% of its stores. Radio Shack's closures were to top 10%, but a legal dispute has delayed that process, which is expected to be scaled back.
Retail CMBS delinquencies have been declining along with the overall CMBS delinquencies. The retail rate declined by four basis points in April to 5.11%, while the overall rate moved three basis points to 5.13%.
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