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CRE Finance World, Summer 2013

In 2012 with the CMBS markets starting to gain traction, CMBS did a different type of double-down, as it lent on two large Strip properties that had portions of their retail previously securitized through CMBS. The projects were the Grand Canal Shoppes, which added the Shoppes at the Palazzo as additional collateral compared to the previous securitization, and the Fashion Show Mall. The Fashion Show Mall’s sales mix differs from that of most of the other major retail venues on the Strip, as it draws sales revenue more significantly from the local shopper. Both properties are well positioned on the Strip to capture their respective target shoppers. At the end of 2012, there was approximately $2.5 billion of trust balance ($3.0 billion whole loan balance) of Strip and Boardwalk CMBS loan collateral outstanding in six transactions. CMBS also wagered on several other casino/hotels in 2005-2007 that are 5905_BBG_CMA_AD_Resize_MECH.pdf 1 4/24/13 2:40 PM In the past five years, BBG has grown to become a national appraisal, valuation and assessment firm with 16 offices serving a diverse client base. We provide you with personalized attention and timely responses through a single point of contact. CALL SUSAN KOMINSKI FOR ALL YOUR DUE DILIGENCE NEEDS. + 203-938-7950 CRE Finance World Summer 2013 50 currently outstanding but are not located on the Strip or Boardwalk. Rather, they are primarily in Puerto Rico and local U.S. towns and excluded due to their securitization inactivity over the last five years. The Strip and Boardwalk Take the High and Low Roads Unlike Las Vegas casinos, which get substantial room and food revenue, Atlantic City relies heavily on gambling revenue from day trippers. Hurricane Sandy, which closed the Boardwalk casinos for nearly a week, if coupled with a bad winter could financially cripple an already-hurt location. On a positive note, our lodging analysts believe that the cleanup for Hurricane Sandy and rebuilding efforts, as well as summer advertising campaigns, could stimulate Jersey Shore town economics. This could bring additional visitors to the area, drawing incremental demand to Atlantic City in 2013. However, we expect this uncertainty,as well as the competitive landscape,to limit CMBS lending activity along the Boardwalk. Las Vegas, on the other hand, is seeing more positive trends in both visitor volume and gaming revenue. It has also started to recover from the significant decline in ADR that it experienced in 2008 and 2009. With few hotels scheduled to come online on the Strip, owners should be able to continue raising their room rates. We believe that RevPAR will grow in 2013 but will remain highly correlated with gaming revenue growth. So although the CMBS house hasn’t always won in Las Vegas, we would expect continued lending activity along the Strip, especially in high-volume years. In Las Vegas and Atlantic City, CMBS Hasn’t Always Had a Winning Hand BROAD COVERAGE. NARROW FOCUS. VALUATION + ADVISORY + ASSESSMENT


CRE Finance World, Summer 2013
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