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KBRA Releases: Macy’s Parade or Charade? KCP Takes a Closer Look

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) releases a special report, “Macy’s Parade or Charade? KCP Takes a Closer Look”, which examines CMBS exposure to the department store operator. In mid-August, Macy’s, Inc. (Macy’s) reported earnings for its fiscal second quarter 2019. Despite a modest gain in comparable store sales, performance during the quarter was significantly below market expectations. An exponential rise in online shopping and growth in off-price retailers has contributed to bleak performance in the big box sector, despite recent efforts by operators to redefine and reimagine their retail offering. While Macy’s is arguably better positioned than both J.C. Penny and Sears, it faces significant headwinds in recapturing market share. Expanding omnichannel capabilities, cutting cost and investing much needed capital into stores should benefit productivity, but may not address the core issues impacting business. Akin to other operators, Macy’s needs to holistically revamp its retail offering in order to appeal to a broader segment of the market, one that includes millennials.

KBRA Credit Profile (KCP) examined its coverage universe of more than 1,000 commercial real estate (CRE) securitizations with an aggregate balance of over $600 billion to identify CMBS exposure to Macy’s store portfolio. Across 272 transactions, there are 214 loans secured by 243 properties, $40.17 billion by allocated loan amount (ALA), with exposure to Macy’s as either a collateral (46%) or non-collateral/shadow (54%) tenant. KBRA has already identified 53 KBRA Loans of Concerns (K-LOC), $5.33 billion (13%), with exposure to Macy’s, including two specially serviced assets totaling $77.9 million (0.2%). Delinquent loans with exposure to the department store retailer represent 1.2% of the total ALA. We will continue to monitor ongoing developments related to Macy’s and report on potential consequences for CMBS collateral within our monthly KBRA Credit Profile (KCP) report for each transaction. For subscribers of the KCP platform, a list of loans and properties exposed to Macy’s is available by clicking here.

To access the full report, click here.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical:

Maverick Force, Associate

(215) 882-5904

mforce@kbra.com

Abhi Patel, Associate

(215) 882-5885

ajpatel@kbra.com

Santiago Alvarez, Director

(215) 882-5851

salvarez@kbra.com

Mike Brotschol, Senior Director

(215) 882-5853

mbrotschol@kbra.com

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