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Home-goods retailer Tuesday Morning Corp. is moving toward a liquidation of additional store locations following a bankruptcy auction for the company’s remaining assets, WSJ Pro Bankruptcy reported. If a Hilco Global unit closes on its bid for Tuesday Morning, the Dallas-based retailer will be liquidated, its senior vice president of finance, Dell Young, testified in bankruptcy court on Monday. Tuesday Morning last week selected Hilco as the successful bidder for more than 200 store locations that weren’t already designated as going out of business. Lenders to Tuesday Morning filed court papers Monday saying that a sale to Hilco likely would result in a liquidation of the business, which filed for bankruptcy in February for the second time in less than three years. “We are working with the company to develop the final detailed plan on which stores will close and do not have a specific number of store closings at this time,” said Ian Fredericks, president of Hilco’s consumer-retail group.

Commercial real estate has experienced its share of busts in recent decades. This one is different, the Wall Street Journal reported. Landlords are contending simultaneously with a cyclical market downturn and with secular changes in the way people work, live and shop. The sudden surge in interest rates caused property values to fall, while the rise of remote work and e-commerce are reducing demand for office and retail space. Investors and economists say these two forces haven’t come together on this scale since the 1970s, when a recession followed surging oil prices and a stock-market rout while new technologies enabled jobs to move out of major cities. This time, the pandemic is largely responsible for accelerating the commercial property upheaval. The U.S. office vacancy rate reached a milestone in the first quarter when it rose to 12.9%, exceeding the peak vacancy rate during the 2008 financial crisis. Despite low unemployment, that figure marked the highest vacancy rate since data firm CoStar Group Inc. began tracking it in 2000.

Bed Bath & Beyond Inc. filed for chapter 11 protection yesterday after the home goods retailer failed to secure funds to stay afloat, and has begun a liquidation sale, Reuters reported. The home goods retailer, which shot to popularity in the 1990s as a go-to shopping destination for couples making wedding registries and planning for new babies, has seen demand drop off in recent years as its merchandising strategy to sell more store-branded products flopped. Last year's moves to abandon that strategy, and to bring in more national brands that shoppers recognize, had not shown signs of working, with the company reporting a loss of about $393 million after sales plunged 33% for the quarter ending Nov. 26. The Union, N.J.-based retailer filed for bankruptcy in a District of New Jersey court, listing both its estimated assets and liabilities in the range of $1 billion and $10 billion, according to a court filing. The company said that it has received a commitment of approximately $240 million in debtor-in-possession financing from Sixth Street Specialty Lending Inc., according to a statement. While the retailer has begun a liquidation sale, it intends to use the chapter 11 proceedings to conduct a limited sale and marketing process for some or all of its assets, according to the statement. The company added that its 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites will remain open and continue serving customers as it starts efforts to effect the closure of its retail locations.

A major developer in Greater Washington, D.C., has defaulted on a $161 million loan balance connected to several of its local suburban office assets, the Washington Business Journal reported. The mortgage, partially backed by seven Brookfield Properties-owned Class B office buildings, the majority in Rockville, was transferred to a special servicer on March 14. The transferwas “due to monetary default,” according to a recent loan servicer report. Bloomberg first reported the default. The default pertains to mortgage debt secured originally by 14 properties, including 11 in suburban Maryland and Northern Virginia that Brookfield acquired in 2016 and 2017. The others were in Florida and Georgia. Brookfield refinanced the portfolio in 2018, carrying an initial balance of $223 million, and then subsequently sold several of the properties, including four in the D.C. area, using proceeds to bring the portfolio's mortgage balance to $161 million as of this month. Brookfield's remaining seven properties in suburban Greater Washington, acquired in aggregate for nearly $263 million, represent more than 1.1 million square feet of ’70s- and ’80s-era office space. Five buildings are in Rockville, one in Silver Spring and one in Arlington. The special servicer, KeyBank National Association, “is working with the Borrower to execute a Pre-Negotiation Agreement and to determine the path forward,” per loan servicer notes. The original loan balance, originated by Morgan Stanley Mortgage Capital Holding, was $223.4 million, but was reduced due to three unscheduled payments that line up with the four building sales — one for $8.17 million in July 2020, one for $34.5 million in January 2022 and one for $19.3 million in October 2022.

A government-backed reverse-mortgage program intended to help seniors tap their home equity ran into problems as interest rates rose, pushing one of the largest participating lenders into bankruptcy last fall, recent court documents show, WSJ Pro Bankruptcy reported. Reverse Mortgage Investment Trust Inc. filed for chapter 11 in November as it faced a liquidity crunch, and the 116,000 loans on its books are now being managed by the U.S. government. RMIT’s bankruptcy filings reveal how the government-backed loan program worked against the company’s survival. The program’s rules required RMIT to take out a rising number of market-rate loans to buy out existing loans that carried lower rates, something that became unsustainable as interest rates kept rising and funding dried up, the lender said. The Department of Housing and Urban Development is “exploring ways to offer support to address current liquidity challenges” facing lenders by making changes to the program, a HUD representative said. What happened to RMIT illustrates the challenges facing reverse-mortgage lenders, said Jim Parrott, a nonresident fellow at the Urban Institute, a Washington think tank. A recent report co-written by Mr. Parrott said policy makers “need to work quickly, because if this burden is not addressed soon, the liquidity challenges that brought down [RMIT] will drive off the rest of the industry.”

Wells Fargo & Co. warned about shakiness in the commercial real estate market and said it’s reviewing its more than $35 billion portfolio of office loans for ways to decrease risk, Bloomberg News reported. The lender has been boosting its allowance for credit losses on office loans for the past four quarters, Chief Financial Officer Mike Santomassimo said on the bank’s first-quarter earnings call Friday. Provisions ticked higher in the first three months of the year in part because of commercial real estate loans, the bank said in a statement. “The office market continues to show signs of weakness due to lower demand, higher financing costs and challenging capital market conditions,” Santomassimo said on the call. “We expect to see more stress over time.” The bank cautioned that the stress wasn’t yet resulting in meaningfully higher losses. But cities such as San Francisco, Seattle and Los Angeles could face issues given the shift toward remote or hybrid work schedules and lower lease rates, the bank warned. Commercial property owners are facing impending maturities this year on $400 billion of debt after interest rates soared, according to MSCI Real Assets. While banks account for a smaller portion of this year’s maturities than commercial mortgage-backed securities, they have more than 50% of loans coming due in 2026 and 2027, MSCI said.

The American Dream mall must pay its lenders nearly $390 million, a judge ruled, The Real Deal reported. The lenders, Western Asset Management and Nonghyup Bank of South Korea, sued in New York Supreme Court in February, claiming an entity affiliated with Triple Five Group‘s giant retail property defaulted when it didn’t repay its $389 million loan in May 2021. In a court decision filed on Tuesday, the judge in the case ruled the entity is on the hook for the loan, plus interest. The ruling came relatively quickly after the suit was filed, as no one contested the case. “It is undisputed that payments due under five promissory notes dated August 2, 2019 … have not been paid when due,” Commercial Division Judge Andrew Borrok wrote. Triple Five, run by the Ghermezian family, has struggled with the New Jersey megamall for years. Building it took far longer than anticipated and cost about $6 billion, and just as it was finally gaining popularity with New Jerseyans, the pandemic hit. The mall owner has faced regular pressure from bondholders as well as from surrounding towns, who have sued for money they say they are owed under development agreements. The East Rutherford retail and amusement complex reportedly lost $60 million in 2021.