The Wall Street Journal reports that after investors got burned on bonds secured by the worst performing becoming more careful about including retail in new CMBS issuances.malls Wall Street firms are
Back in 2010, retail made up on average 56 percent of securitized loans. By the end of last year, the figure had fallen to 33.4 percent.
According to the WSJ explanation:
Losses are greater on troubled shopping centers and malls largely because the properties can't be easily turned around once they begin to slide. Often, when a mall starts to lose shoppers, major tenants such as department stores leave. After that, the property's other tenants often demand rent concessions or lease terminations, further sapping the mall's cash flow. Unlike properties such asor office buildings, such declines often are irreversible.
"If the business case is to make the mall a better mall, that's a hard case to make today," said Spencer Levy, executive managing director of capital markets for CBRE Group Inc. Otherwise, "if you're going to demall it, it's so capital-intensive that it drops the value" of the property.