RPT-Fitch: J.C. Penney Closures Will Have Limited Impact on US CMBS

Tue Jan 21, 2014 9:34am EST

Jan 21 (Reuters) - (The following statement was released by the rating agency)

The Fitch-rated CMBS deals that are exposed to J.C. Penney as announced store closures are capable of absorbing the potential loss. However, we believe significant cash flow changes are unlikely as the stores that are closing have been underperforming for some time and are not drawing substantial traffic to their malls or centers. We believe some malls could benefit if they replace J.C. Penny with a stronger tenant.

J.C. Penney announced it will close 33 of its more than 1,100 stores this week. Seven Fitch-rated deals are exposed. Our understanding is that five other legacy (non-Fitch-rated) deals have some exposure.

Over the longer run, Fitch believes continuing struggles for major retailers (including J.C. Penney, Sears, and BestBuy ) may impede the general stabilization we have seen in the retail CMBS market. Both J.C. Penney and Sears have significant real estate portfolios in a wide range of markets. If large scale closures take place, we would expect dominant class-A malls to re-tenant space while weak malls could be put under pressure.