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Online shopping dooms brick and mortar stores/malls
[Reuters] - The dramatic shift to online shopping that has crushed U.S. department stores in recent years now threatens the investors who a decade ago funded the vast expanse of brick and mortar emporiums that many Americans no longer visit.Weak September core retail sales, which strip out auto and gasoline sales, provide a window into the pain the holders of mall debt face in coming months as retailers with a physical presence keep discounting to stave off lagging sales. Some $128 billion of commercial real estate loans - more than one-quarter of which went to finance malls a decade ago - are due to refinance between now and the end of 2017, according to Morningstar Credit Ratings. Wells Fargo estimates that about $38 billion of these loans were taken out by retailers, bundled into commercial mortgage-backed securities (CMBS) and sold to institutional investors. Morgan Stanley, Deutsche Bank and other underwriters now reckon about half of all CMBS maturing in 2017 could struggle to get financing on current terms. Commercial mortgage debt often only pays off the interest and the principal must be refinanced. The blame lies with online shopping and widespread discounting, which have shrunk profit margins and increased store closures, such as Aeropostale's bankruptcy filing in May, making it harder for mall operators to meet their debt obligations. Posted by: Besoeker 2016-10-23 |
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