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Credit Worries at Lightstone?

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The New York Times has a piece today raising some alarms about Lightstone Group (which owns Prime Retail, among other assets.) Last June, the firm acquired Extended Stay hotels for $8.1 billion, which may now be causing the firm some credit headaches. It's also tried to refinance loans on some of its retail assets. To date it hasn't missed any payments. Overall, David Lichtenstein expects the firm to weather the storm.

Lightstone is also trying to renegotiate the terms of its loans with a total balance of $139.7 million for the Burlington Square Mall in Burlington, N.C., and the Macon Mall in Macon, Ga. Both malls have fierce competition from shopping centers, Mr. Lichtenstein said.

Delinquencies among loans in commercial mortgage-backed securities have been inching up, but the rate so far remains low. Realpoint Research, a division of Capmark that tracks commercial mortgage-backed securities, singled out the Lightstone mall loans in a recent report as among only three with an unpaid balance exceeding $100 million that have been transferred to loan officers known as “special servicers” because they were in danger of default.

Though Lightstone is current on its mortgage payments, the company has told the special servicer, CW Capital Asset Management, that it cannot keep paying because of declining cash flow, said Frank Innaurato, a managing director of Realpoint.

“It raises a red flag for a company such as Lightstone that grew very fast over the last couple of years that they are finding properties that they might not want to keep backing going forward,” Mr. Innaurato said.

But Mr. Lichtenstein, 47, shrugs off his problems with the mall and apartment mortgages. Given the size of Lightstone's portfolio — 23 million square feet spread across about 950 individual properties — a few losses are to be expected, he said.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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