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Minimal CMBS Exposure To Mills Sale

The possible sale of all or part of retail REIT The Mills Corp. shouldn’t pose any threat to the Fitch-rated U.S. CMBS transactions with Mills exposure, according to Fitch Ratings. This followed a review of Fitch’s entire U.S. CMBS portfolio.

“The underlying properties have continued to perform well in light of financial and regulatory concerns that came to light within the last year,” says Lauren Cerda, senior director, Fitch Ratings. “On average, occupancy levels remain consistent with issuance numbers, net cash flow is in-line with Fitch's expectations and there is no imminent concern of default across the company's portfolio.”

Fitch has identified 13 properties across 14 U.S. CMBS transactions with exposure to Mills. Even so, Fitch has no immediate plans to make rating adjustments, and any future rating actions would chiefly depend on the operating performance of each property and its affect on the overall credit composition of its respective CMBS transaction.

REIT heavyweights like Simon Property Group, General Growth Properties and Vornado Realty Trust are cropping up as possible buyers. To that end, a possible sale of all or part of Mills could raise concerns about who could buy the company, says Cerda. “While Mills' portfolio does include some traditional malls, they are more widely known as an operator of large hybrid malls which combine outlet, entertainment and traditional stores,” says Cerda. “Therefore, a potential sale may necessitate that only a more specialized mall owner would be able to come in and purchase at least that portion of Mills' properties, leaving open the possibility that the portfolio could be split up between traditional mall operators and outlets.”

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