Throwing in the Towel? Bed Bath & Beyond's Weak Performance Could Affect About $4.4 Billion in CMBS

DBRS Morningstar believes there may be some risk for the 126 properties backing commercial mortgage-backed securities (CMBS) loans, totaling nearly $4.4 billion in allocated property balance, that have exposure to Bed Bath & Beyond because the company has seen its operations weaken considerably. The home furnishings retailer has shrunk its total store base to 995 at the end of 2021 from 1,500 at the end of 2019. Potential additional store closures resulting from Bed Bath & Beyond continuing to retrench present significant risk for properties with near-term lease expirations because of uncertainty over demand and the potential for renegotiated lease terms at lower rents. We identified 21 Bed Bath & Beyond properties in CMBS loans, backing $659.1 million in allocated property balance, with a lease that will expire through year-end 2023, and 11 of these properties (backing $299.2 million) would be materially affected if the retailer were to depart at lease expiration.