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CRE Finance World, Summer 2013

A publication of Summer issue 2013 sponsored by CRE Finance World Summer 2013 49 Following on the heels of the Aladdin double-down in 2006 came the highest CMBS issuance year so far. CMBS loan originations on the Strip and Boardwalk once again rose in 2007. And for the first time since 1998, originated loans in 2007 were more dependent on the casino/hotel operations in Las Vegas and Atlantic City than on its retail component. Three loans were made on the casino/ hotel portion of the Atlantic City Hilton, Resorts Atlantic City, and Planet Hollywood. All three of the casino/hotel properties have been appraised at significantly lower valuations since securitization (see Tables 2 and 3). Table 2 The Strip/Las Vegas Securitization Comparisons Casino/hotel property type includes fee interest in hotel and casino. Table 3 The Boardwalk/Atlantic City Securitizations Casino/hotel property type could include casino and hotel, land parcels, and ground leases. * Allocated loan balance. ¶ Reappraised November 2009. § Reappraised January 2013. Property marketed for auction in August 2012. Offers were not high enough to warrant selling. Sustained limited damage from Hurricane Sandy. The Atlantic City Hilton Casino Resort went into foreclosure under a forbearance agreement, which was ultimately terminated due to a failed sales effort. The property was later released in return for the borrower’s consent to allow for foreclosure on the borrower’s other casino/hotel properties. Resorts Atlantic City (Atlantic City’s first casino), which has had financial difficulty, suffered a 100.96% loss severity rate on its liquidation. Both of these properties continue to struggle. The Atlantic City Hilton Casino Resort changed its name to the Atlantic Club and has suffered the steepest decline in hotel occupancy along the Boardwalk since 2006, when its rate was 96.4%. Through September, its 2012 occupancy rate was 66.3% compared with an average of 86.2% for the other Boardwalk properties. It reported a $67.59 ADR for 2012 through September compared with $98.55 for the other casino/hotels. Resorts Atlantic City fared better with an 82.3% occupancy and $78.78 ADR, but these metrics are still at the lower end for Boardwalk properties. The value of Planet Hollywood, which had a loan modification in February 2011, has plummeted by more than one-third (based on a September 2011 appraisal) since securitization. After breaking the CMBS house, CMBS took a hiatus from the casino/hotel business in 2008-2010 until returning in 2011 with the securitization of the ShowCase Mall Phase II on the Strip and the Borgata Hotel on the Boardwalk. In Las Vegas and Atlantic City, CMBS Hasn’t Always Had a Winning Hand


CRE Finance World, Summer 2013
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