Post-Lockdown New Normal: Many Brick & Mortar Stores Will Not Reopen, CMBS will Default, Mess to Ensue | Wolf Street

As many brick-and-mortar stores have shut down, and as people are fearful about going to those stores that are still open (such as grocery stores), ecommerce sales have exploded. Americans have long been reluctant to buy groceries online. But that has changed overnight.

Amazon, Walmart and other online retailers have gone on a hiring binge to deal with the onslaught of online buying, including the stuff people normally bought in grocery stores. Online retail is the huge winner of COVID-19. When the Q1 and Q2 ecommerce revenues emerge, we will see a historic spike in online sales even as brick-and-mortar sales went straight to heck.

All major department store chains and many shopping malls have shut down. Hundreds of thousands of employees have gotten laid off as retailers are trying to figure out where to go from here. And they’re now pushing online to the max – because for them, that’s the only thing there is.

When a CMBS loan defaults – or even when the loan hasn’t defaulted yet but when a mall backing a CMBS loses an anchor tenant, such as a department store – servicing gets switched from the master servicer to a “special servicer.” This is laid out in the pooling and servicing agreement (PSA). The special servicer’s job is to determine if the borrower can become current through a loan modification or a debt workout. Under many PSAs, a special servicer has the right to purchase the property at a discount if that same special servicer decides the loan cannot be brought current. Even under normal circumstances, this invites self-dealing.

via Post-Lockdown New Normal: Many Brick & Mortar Stores Will Not Reopen, CMBS will Default, Mess to Ensue | Wolf Street