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WMC Loan in Special Servicing

By Staff -- Gifts and Dec, 11/2/2009 10:05:00 AM

Las Vegas — A loan secured by 1.1 million square feet of showroom space at World Market Center in Las Vegas was placed in “special servicing” by its lender in September, according to Fitch Ratings. Loans are usually placed in special servicing when they are at risk of default, but World Market Center officials said that they are not behind in their loan payments, according to The Business Journal, something not contradicted by Fitch.

The WMC’s debt service coverage ratio fell from 1.05 to 0.98 from the end of 2008 to the first quarter of 2009, thus causing the problem. The ratio measures available cash compared to interest, principal and lease payments, and anything under 1.0 means negative cash flow.

The change in status of the WMC loan, along with five smaller unrelated loans, was enough to convince Fitch to give a Ratings Watch Negative Placement to 16 classes of mortgage pools, according to Reuters. WMC’s was the second largest loan at 8.6 percent; the other loans transferred to special servicing made up a total of 2.9 percent.

According to The Las Vegas Sun, the property received a $225 million refinancing loan in 2005. Fitch said the special servicer reported that occupancy fell to 88 percent at year-end 2008, and that the center's ability to service its debt has declined. The Sun reported that WMC declined to discuss current occupancy statistics for competitive reasons.

"World Market Center's debt is part of a much larger pool of collateralized mortgage backed securities (CMBS) that are traded in secondary markets amongst investors and bond traders. CMBS pools are frequently rated by the rating agencies based on their technical analysis of the pool as a whole, and such actions have no impact on World Market Center, nor does it affect Las Vegas Market and its operations. World Market Center's debt is not delinquent," Bob Maricich, CEO of World Market Center Las Vegas, said in a statement.

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