Why Premium Grocers Skew CMBS Delinquency Rankings

How Property Types Distort Delinquency Rates

According to Trepp, commercial mortgage-backed securities data can mislead investors when assessing grocery tenant risk. Whole Foods has a 22.4% delinquency rate among top CMBS tenants. Safeway follows at 9.7%, while Costco stands at 5.5%. Meanwhile, Walmart, Dollar Tree, and Dollar General remain at or below 1.7%.

However, the picture changes when examining where those delinquencies originate. Unconventional collateral drives much of the distress, including urban retail condos and superregional malls. Traditional grocery-anchored shopping centers tell a different story. The property’s business plan and exposure often drive distress more than the supermarket’s credit quality.

The Details

A handful of large, atypical loans drive the headline delinquency rates. Whole Foods’ entire nonperforming CMBS exposure comes from Manhattan’s Columbus Square. Lenders underwrote the mixed-use condominium development at peak pricing in 2014. They split the loan across four conduit deals. This single loan represents nearly 44% of the deal’s remaining balance.

Safeway’s main delinquency cluster comes from Sunvalley Shopping Center in Concord, CA. The superregional mall carries $129.2M in exposure. Meanwhile, Costco’s rate comes from Lakewood Center, with $307M spread across several CMBS notes. In both cases, large balances and weak collateral performance inflate the grocers’ apparent risk.

CMBS Grocery Risks Reflect Collateral, Not Chains

Dollar General and Dollar Tree present a sharp contrast. Their CMBS exposure spans hundreds of small, single-tenant properties. Loans typically remain below $2M each. Dollar General averages less than $1M per troubled loan. Its total distressed CMBS exposure reaches roughly $11M.

Therefore, no single default can meaningfully shift its overall delinquency rate. Dollar stores appear safer under this measurement despite generally weaker underlying real estate. Their smaller loans spread risk across a much broader portfolio.

Researchers found an even clearer difference when isolating grocery-anchored center loans. Whole Foods and Costco both post 0.0% delinquency rates. This comparison shows how collateral type drives headline risk. Large mixed-use and mall properties create greater exposure through concentrated loans and complex rent rolls.

Why It Matters

Landlords, lenders, and investors can draw misleading conclusions from surface-level CMBS tenant statistics. A premium grocer’s high delinquency rate does not necessarily signal problems. Instead, it can reflect distress beyond the anchor’s control.

Whole Foods continues expanding its footprint, supported partly by Amazon’s conversion of former grocery locations into Whole Foods stores. This activity further separates chain-level performance from distress tied to individual properties.

Meanwhile, dollar stores can appear relatively low-risk even while their broader sector faces challenges. Their exposure spreads across numerous smaller loans. Investors should prioritize collateral quality, loan structure, and anchor roles over aggregated tenant-level CMBS rates.

What’s Next

CMBS underwriting and investor diligence will likely place greater emphasis on property-type exposure. Urban mixed-use and mall-backed deals deserve particular attention. Large loan concentrations in these properties can significantly distort tenant risk assessments.

More granular data should increasingly separate traditional grocery-anchored centers from atypical collateral. That shift could make delinquency analytics more meaningful. It could also redirect market attention toward property-level fundamentals.

For lenders, collateral-based risk screens can provide clearer signals than banner names alone. This approach should better align perceived tenant risk with actual property performance.