Friday, August 10, 2012

Thirty One-Property Retail Portfolio Reverts from Macquarie/DDR to Wells Fargo Bank

VIZZDA—August 10th, 2012 – A thirty one-property portfolio purchased by a co-venture between DDR and Macquarie on September 26th, 2005 for approximately $396.2m from the now-defunct Mervyn’s Department Stores reverted to Wells Fargo Bank at Trustee’s Auction. Wells Fargo was acting in its capacity as trustee for the registered holders of the GE Capital Commercial Mortgage Corp. Commercial Pass-Through Series 2005-C4, with Kevin C. Donahue of CW Capital Asset Management as special servicer. These properties represented less than 20% of the operating assets of Mervyn’s Department Stores at the time of sale and are located in Arizona, Nevada, California and Texas.

The Maricopa County portion of the portfolio was comprised of three properties built from 1988 to 1991 and were acquired for a total of $33.44m. They are as follows:

Price/ Ft2
2994 N Alma School Rd
4225 W Thunderbird Rd
6505 E Southern Ave

The portfolio was secured with a $265,687,500 line of credit comprised of a fixed rate note of $212,550,000 and a variable rate note of $53,137,500 with German American Capital Corporation. German American Capital Corporation securitized the debt and assigned it to Wells Fargo Bank on January 26th, 2012. Wells Fargo selected CW Capital Asset Management as the special servicer and noticed the CMBS debt on February 13th, 2012. The Maricopa County portion of the portfolio reverted at Trustee’s Auction on August 9th, 2012 with an $11m credit bid or approximately $44.98/ Ft2.

At the time of purchase, all of the properties were leased to Mervyn’s for 15 years firm with a ten-year option to extend. In August 2008, Mervyn’s declared Chapter 11 Bankruptcy and had vacated all sites following Chapter 7 Liquidation by December 31st, 2008. In early 2010, the Mervyn’s Joint Venture adjusted its holding period projections for the remaining properties triggering $37.6m in impairment charges. In June 2010, the Mervyn’s Joint Venture was served a Notice of Default for failing to make scheduled debt service payments. The properties were placed in court-ordered receivership in August 2010. Due to the non-recourse nature of the loans, this event represents the termination of both obligation and entitlement for DDR from an accounting standpoint, though the resolution remains ongoing.

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Paul Dionne
Director of Anayltics

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