Simon Property Group refinanced two outlet centers on 6 July 2026. One is in Pismo Beach, California, on the coast north of Santa Maria; the other is in Queenstown, Maryland, on the Eastern Shore. Together they are 437,025 square feet, appraised at $126.7 million, and they secure a $75 million interest-only loan at 6.8510% that matures on 1 August 2036. Simon put $5,798,231 of its own equity in to pay off an $79,916,352 balance. Five weeks later, $70 million of that loan went into a commercial mortgage securitization, and the prospectus for it was filed with the SEC on 14 August 2026.[1]
Prospectuses like that one are the only place most people will ever read a real co-tenancy clause. The leases themselves are not public. But the underwriter has to tell bond buyers which tenants can cut their rent or walk, so somewhere around page 230 of a 3-million-character document there is a table of the five largest tenants with footnotes under it, and the footnotes summarize the clauses. In this deal, two of those footnotes describe co-tenancy provisions. Same sponsor, same leasing organization, same loan, two outlet centers 2,700 miles apart. The clauses do not measure the same thing.
Two clauses, two denominators#
Old Navy has 13,000 square feet at Queenstown. It has been there more than ten years and recently signed a seven-year renewal running to 30 June 2033, with no renewal options after that. Its clause, as the prospectus states it:
Old Navy’s lease at the Queenstown Premium Outlets Property includes an operating co-tenancy provision requiring at least 70% of the shopping center gross leasable area (excluding the premises and outlots) to be open and operating. If the threshold is not met, tenant is entitled to reduced rent (75% of scheduled rent, declining to 50% after 12 months), and may terminate the lease upon 180 days’ notice if the condition continues for 12 consecutive months.[2]
Guess has 10,600 square feet across both centers, and the clause attaches to the Pismo Beach space:
The Guess lease at the Pismo Beach Premium Outlets Property states that the tenant is entitled to co-tenancy rent equal to 7% of gross sales if occupancy of the landlord’s tract falls below 75% for more than 120 days and may terminate the lease upon 90 days’ notice if the co-tenancy condition continues for 18 consecutive months.[2]
Read the triggers next to each other. Old Navy’s threshold is square footage that is “open and operating.” Guess’s is “occupancy of the landlord’s tract.” Those are different measurements of the same shopping center, and they come apart in the one situation co-tenancy clauses exist for.
A tenant that closes its store but keeps paying rent is the central fact of retail in 2026. It is occupied space on the rent roll and a dark window on the sidewalk. Under Old Navy’s clause it stops counting, because it is not open and operating. Under Guess’s clause it keeps counting, because the tract is still occupied under a lease. Run the same center through both: if 80% of the gross leasable area is leased and 65% of it has the lights on, Old Navy is entitled to alternate rent and Guess is entitled to nothing.
The prospectus does not leave this as a theoretical point. Its own description of how occupancy was reported says that the figures reflect tenants who “are ‘dark’ tenants but paying rent,” among four other categories of tenant who are counted but not quite there: tenants who have not executed leases, tenants who have signed but not taken occupancy or are not paying full rent, tenants looking to sublet, and borrower affiliates on master leases.[3] Every one of those is occupancy under Guess’s wording. None of them is open and operating under Old Navy’s.
Something else is different. Old Navy’s denominator excludes two things: its own premises, and the outlots. Pulling your own space out of the denominator is standard and sensible; you should not be able to cure your own co-tenancy failure by staying open. Pulling the outlots out matters more than it looks. Outlot buildings at an outlet center are the pad sites, usually restaurants and a bank branch, and they are the parts of a retail property most likely to stay occupied when the inline shops empty out. Excluding them makes the test harder for the landlord to pass, because the most durable square footage does not count toward the 70%.
Queenstown is 289,422 square feet. Take out Old Navy’s 13,000 and the denominator is at most 276,422, less whatever the outlots are. Seventy percent of that is 193,495 square feet that must be open for business. The prospectus does not say how much square footage sits on the outlots at Queenstown, so that is a ceiling on the denominator rather than the number itself.
The number that decides it is not in the file#
Here is where the loan file and the lease stop talking to each other.
The prospectus reports occupancy for the two centers twice. Including temporary tenants: 92.9% as of 5 May 2026, 92.4% at the end of 2025, 96.0% at the end of 2024. Excluding temporary tenants: 80.4%, 80.3% and 80.8% on the same three dates.[4] Both numbers are true and they are 12.5 percentage points apart. On 437,025 square feet that gap is about 54,600 square feet, held by twelve temporary tenants.
Then a footnote to the tenant table explains the accounting: “Tenant SF excludes temporary tenants. Temporary tenant square footage is included as Vacant Space."[2]
So a temporary tenant, a seasonal pop-up with staff and a register and a sign, is vacant space in the rent roll and open for business on the ground. And a dark tenant on a long lease is occupied space in the rent roll and a locked door on the ground. The rent roll and the co-tenancy clause are wrong about each other in opposite directions, and the loan file reports the rent roll.
Which means the quantity Old Navy’s clause actually turns on, the share of Queenstown’s gross leasable area excluding outlots that has its doors open, is not printed anywhere in the document that discloses the clause. You can bound it. The portfolio is 19.6% vacant on the permanent-tenant basis, which is 85,677 square feet. If every vacant foot in the portfolio happened to sit at Queenstown, Queenstown would be 70.4% occupied and Old Navy’s threshold would be a few thousand feet from failing. That is a bound and almost certainly not the fact, since vacancy is reported on a combined basis and Pismo Beach has its own share of it. What the document supports is narrower: the clause is live at a 70% threshold against a portfolio that has run near 80% on the measure the lender tracks for three straight years, and nobody reading the prospectus can tell how much room is left.
Somebody can tell you, of course. The leasing office at Queenstown knows exactly which units are dark this month. That information exists in the property manager’s reports and not in the loan file, and the clause is drafted against the version the property manager has.
What 75 percent of minimum rent is worth#
Old Navy pays a minimum rent of $21.21 per square foot with 2.0% annual escalations, plus percentage rent of 12.0% of annual gross sales above a $4.0 million breakpoint.[5] At 13,000 square feet the minimum rent is $275,730 a year, or $22,977.50 a month.
The clause reduces it to 75%, which is $206,797.50 a year, and then to 50% after the condition has run more than 12 consecutive months, which is $137,865.
The termination right needs the condition to continue for 12 consecutive months, and then 180 days’ notice. So the full path, from the day the center drops below 70% open to the day Old Navy’s keys hit the table, is 18 months. Over those 18 months Old Navy pays twelve months at 75% and six at 50%: $206,797.50 plus $68,932.50, which is $275,730. Full minimum rent for the same 18 months would be $413,595. The clause is worth $137,865 to Old Navy over the life of the remedy, which is exactly six months of its minimum rent. Those figures hold the $21.21 rate flat and ignore the 2.0% escalations, which the prospectus does not tell us whether the alternate rent calculation picks up.
Compare that to the all-in number. The tenant table shows Old Navy at $441,635 of underwritten annual rent, $33.97 per square foot, against $3,239,353 of sales in the twelve months to 31 March 2026 and an occupancy cost ratio of 13.6%.[6] Thirteen point six percent of those sales is $440,552, within a thousand dollars of the underwritten rent figure, which says the $441,635 is Old Navy’s whole occupancy cost including recoveries, not its minimum rent.
That matters for what the clause does. The co-tenancy remedy cuts minimum rent. It says nothing about taxes, insurance or common area maintenance. Halving $275,730 out of a $441,635 obligation takes about 31% off the total. Old Navy in a center where a third of the doors are shut still pays its full share of plowing the parking lot. If you want the remedy to reach the recoveries you have to say so in the clause, and this one does not. We have covered what happens when operating expense pass-throughs are left to run on their own terms in the ratchet that keeps a base year from ever falling.
The percentage rent carve-out protects a rent stream that disappears first#
One sentence in the Old Navy description deserves its own section. During the alternate rent period, the prospectus says, “percentage rent remains payable at the contractual rate and is not subject to reduction."[5]
That is a carefully drafted landlord protection. It is also worth nothing here, for two reasons that compound.
Old Navy’s percentage rent is 12.0% of gross sales above a $4.0 million breakpoint. Its sales in the twelve months to 31 March 2026 were $3,239,353. Below the breakpoint, so no percentage rent is owed, and the prospectus says so directly. Old Navy’s sales per square foot at Queenstown have been $263, $254, $248 and $249 across 2023, 2024, 2025 and the trailing twelve months.[7] To clear $4 million on 13,000 square feet the store needs $307.69 per foot, which is 23% above where it has sat for four years.
Now add the trigger. The carve-out only operates while the co-tenancy condition is failing, which is to say while fewer than 70% of the center’s doors are open. Shoppers do not drive to the Eastern Shore for a third-empty outlet center. The one component of rent the landlord carefully protected from reduction is the component that falls on its own precisely when the clause activates, and it was already at zero before any of it started.
The number looks like security on the page because it is a percentage of something, and what it is a percentage of is the thing that broke. The definition of gross sales does the real work in these clauses, which is the subject of what happens when the goods ship from somewhere other than the store.
Guess gets a rent that shrinks with the center#
Guess took the other structure. Instead of a percentage of its minimum rent, its co-tenancy remedy is a percentage of its own sales: 7% of gross sales, full stop, in place of rent.
Guess’s 10,600 feet produced $1,965,875 of sales in the twelve months to 31 March 2026, $185.46 per foot, at an underwritten rent of $201,710 and an occupancy cost of 10.3%.[6] Seven percent of those sales is $137,611. Against $201,710 that is a cut of about 32%, which lands in the same neighborhood as Old Navy’s deepest step-down, so the two clauses are roughly calibrated to each other even though they are built differently. Treat the dollar figure as the shape of the cut rather than the number: Guess occupies space at both centers, the prospectus reports its sales and rent combined, and the clause operates only at Pismo Beach.
The structural difference shows up in year two. Old Navy’s 50% is 50% of a fixed, escalating minimum rent, so it holds its level while the center deteriorates around it. Guess’s 7% rides its own sales. Guess’s sales per foot went $214, $178, $180, $185 over the same four periods.[7] If the center is failing badly enough to trip the clause, Guess’s sales fall, and the substitute rent falls with them without anyone renegotiating anything.
That is the better remedy for a tenant in a center with real problems, and the worse one if the trigger fires on a technicality while the store is trading fine. A 7%-of-sales rent for a tenant whose occupancy cost is already 10.3% is a 3.3-point improvement. For Coach in the same portfolio, trading at $757 per foot with a 4.0% occupancy cost, a 7%-of-sales co-tenancy rent would be a raise.
Guess cannot reach its own exit#
Guess’s lease expires on 31 January 2028.[6]
Its termination right requires the co-tenancy condition to continue for 18 consecutive months, and then 90 days’ notice. Today is 1 October 2026. There are 16 months left on the lease. Even if occupancy of the landlord’s tract had dropped below 75% this morning, the eighteenth consecutive month of failure would arrive after the lease had already ended, and the 90-day notice after that.
So two thirds of Guess’s co-tenancy clause is dead. The 7%-of-sales substitute rent is live, and it needs 120 days of failure to start, which fits. The termination right cannot be reached from here. It could have been reached in 2024. It will be available again if Guess renews, and it has no renewal options, so the renewal is a negotiation and the clause is one of the things on the table.
Long cure periods on termination rights are the ordinary landlord ask and they are usually waved through, on the theory that a tenant who wants out that badly will find another way. What the Guess clause shows is that past a certain length, measured against the remaining term, a cure period stops being a delay and becomes a deletion. An 18-month-plus-90-days condition in a lease with four years to run is a right. The same words in the last 20 months of the term are decoration. Nothing in the clause changes; the calendar does the work. The same arithmetic governs renewal notice windows, which we went through in the deadline that runs while you are still deciding.
The neighbors all negotiated something different#
The five largest tenants in this portfolio hold five different exit mechanics, and only two of them are co-tenancy.
Nike Factory Store, the largest at 23,500 square feet, has no termination option at all and pays no base rent at Queenstown. It pays percentage rent in lieu, 3.25% of gross sales, which came to about $236,000 on trailing sales. At Pismo Beach it pays $378,000 of base rent on 10,500 feet and recently signed a 3,000-foot expansion and a seven-year extension.[8]
Polo Ralph Lauren, 20,000 feet, pays 3.0% of gross sales in lieu of base rent at both centers, $84,549 at Pismo Beach and $91,855 at Queenstown. Its exit is a sales floor, not a co-tenancy test: it can terminate at Queenstown if its gross sales for a measuring period, each 1 December to 30 November, do not exceed $4,500,000, with the first measuring period running from 1 December 2033 to 30 November 2034, on notice within 60 days after the period ends. It can also leave on 60 days’ notice any time on or after 31 January 2035.[9] Its current sales at Queenstown are $3,061,840, well under the $4.5 million floor. If the floor were testable today, Polo Ralph Lauren could leave. It is not testable until the end of 2034.
The Children’s Place, 11,214 feet, has no co-tenancy right and no sales floor. What it has is a relocation right: if the landlord elects to move the premises, Children’s Place can terminate if the proposed space is unacceptable, by notice within 30 days of the relocation notice, and if it neither accepts the new space nor terminates, the landlord may then terminate the lease on notice.[10] That last clause is the interesting one, and we took a long look at what a relocation right does to a tenant whose business is tied to a particular door in the clause that moves the premises and leaves the license behind.
Five tenants, 17.9% of the square footage, and the landlord’s downside is structured five ways: nothing, nothing, 70%-open co-tenancy, 75%-occupied co-tenancy, a $4.5 million sales floor starting in 2034, and a relocation right with a reciprocal termination. None of that is sloppy. Each one is the residue of a negotiation with a national tenant that had its own form and its own leverage, and the renewal dates are years apart. But it means there is no such thing as “the co-tenancy exposure at Queenstown.” There are 61 permanent leases and the exposure is whatever those 61 documents say.
What the underwriting assumed about all of it#
The prospectus is explicit about how the cash flow handled this, and the sentence is worth quoting exactly:
In many cases, co-tenancy provisions were assumed to be satisfied and vacant space was assumed to be occupied and space that was due to expire was assumed to have been re-let, in each case at market rates that may have exceeded current rent.[3]
That is a disclosed assumption rather than an error, and it is standard across the market. It is still a specific thing to have assumed in a pool where, as the same document says, “a number of retailers, including retailers that have stores located at the mortgaged properties, have announced ongoing store closures or are in financial distress, and other tenants at the mortgaged properties have co-tenancy clauses related to such retailers."[11]
The loan can carry it. Underwritten net cash flow is $11,787,460 against a 2.26x debt service coverage ratio, a 59.2% loan-to-value and a 16.4% debt yield, interest-only for the full ten years, on a portfolio whose gross sales have risen slightly every year since 2023 to $121.7 million.[1] Old Navy’s entire minimum rent is $275,730, about 2.3% of underwritten net operating income. Guess’s is less. If both co-tenancy clauses fired at once and both tenants dropped to their floors, the loan would not notice.
What would matter is the thing the clauses are a symptom of. Both triggers are occupancy thresholds, and an occupancy threshold failing at an outlet center is not an isolated event; it is the point at which enough inline space has emptied that the remaining tenants start exercising rights in sequence. The reserves are set up for a quiet decade: real estate taxes, insurance, replacement and rollover reserves all funded at $0 with springing triggers, and a hard lockbox with springing cash management.[1] There is no co-tenancy reserve, and nobody funds one.
A lender looking at a retail loan has the same problem a landlord has, one layer removed: the aggregate number it can see is occupancy, and the numbers that govern are 61 separately negotiated thresholds, each with its own denominator, its own cure period and its own definition of what counts as a store being open. The non-disturbance side of that relationship, and what a lender can actually promise a tenant, is in the SNDA that decides whether your lease survives a foreclosure.
Can you tell which of your leases measure open doors and which measure signed leases?#
This is a search problem before it is a legal problem, and the search has to run across documents rather than within one.
Acrebase is built for that layer. It extracts clauses across a portfolio and makes them comparable, so the question “which of my leases have an operating co-tenancy test and which have an occupancy test” returns a list instead of a reading assignment. For a landlord with 61 leases at one center, the useful output is a table: trigger type, threshold percentage, what comes out of the denominator, cure period before rent relief, cure period before termination, notice period, and whether recoveries sit inside the reduction or outside it. Those seven fields decide the exposure, and in this portfolio no two leases would fill them in the same way.
The same extraction answers the arithmetic question from the Guess clause, which is the one nobody runs: cure period plus notice period against remaining term, lease by lease. That calculation turns a list of termination rights into a shorter list of termination rights that can actually be exercised before the lease ends, and it changes every month as the terms run down.
Acrebase also maintains a team’s approved clause library and negotiation playbook, which is where the drafting side of this lands. If your house position is that co-tenancy tests measure gross leasable area open and operating, excluding temporary and seasonal tenants, with the reduction reaching recoveries and a cure period no longer than a quarter of the remaining term, that position should appear the same way in every lease your team signs. Right now it probably depends on which form the counterparty sent and who reviewed it. Its AI reads prior negotiations to flag when an incoming draft’s co-tenancy language is more aggressive than what the team has accepted elsewhere, and to suggest the fallback the team actually got last time, before the clause gets initialed into a new lease. We wrote about the portfolio-wide version of this question in knowing which leases are wired to which anchor, and about the way an estoppel certificate can quietly sign a co-tenancy right away in the waiver hiding in a routine form.
If you are a landlord, write the denominator and the verb, and know the difference between them. “Occupancy” in a co-tenancy clause buys you the dark tenant who keeps paying; “open and operating” does not. If you accept an open-and-operating test, decide in the clause whether temporary and seasonal tenants count, because they are 12.5 points of occupancy in this portfolio and the rent roll classifies them as vacant. Decide what comes out of the denominator and say it: outlots, anchors, pads, the tenant’s own premises. Keep the reduction on minimum rent and keep the recoveries out of it, in writing, because a tenant who is paying 50% of base is going to argue its share of the parking lot went down too. And do not treat a long cure period as free; it is the thing that quietly kills the tenant’s termination right near the end of the term, which also means the clause stops disciplining your leasing team.
If you are a tenant, three checks. First, does your clause measure open doors or signed leases, and does the center you are in today differ on those two numbers? If it does, you have either a right you did not know you had or a right you thought you had. Second, does the reduction reach your recoveries, or only your minimum rent? Old Navy’s clause takes about 31% off the total and leaves the rest. Third, run the calendar: cure period plus notice period against months remaining. Guess’s termination right is unreachable with 16 months left on a lease that needs 21. If your sum comes out the wrong way, the protection you negotiated expired without anybody closing a store, and the time to fix it is the renewal, not the day the anchor goes dark.
Footnotes
[1] Morgan Stanley Bank of America Merrill Lynch Trust 2026-C36, Commercial Mortgage Pass-Through Certificates, Series 2026-C36, Form 424B2 filed 14 August 2026 by Banc of America Merrill Lynch Commercial Mortgage Inc. as depositor; approximate offered balance $619,061,000. Mortgage Loan No. 2, “Pismo Beach & Queenstown Premium Outlets,” is 9.99% of the initial pool balance. Source for the whole loan of $75,000,000 evidenced by two pari passu notes with $70,000,000 in this trust and $5,000,000 elsewhere, mortgage loan seller Barclays Capital Real Estate Inc., note date 6 July 2026, maturity 1 August 2036, rate 6.8510%, 120 months interest only, borrower sponsor and guarantor Simon Property Group, L.P., property manager Simon Management Associates, LLC, 437,025 square feet, appraised value $126,700,000 (Pismo Beach $63,500,000 as of 20 May 2026; Queenstown $63,200,000 as of 14 May 2026), loan-to-value 59.2%, net cash flow debt service coverage 2.26x, underwritten net operating income $12,290,039, net cash flow $11,787,460, debt yield 16.4%, a loan payoff of $79,916,352 against borrower sponsor equity of $5,798,231, hard lockbox with springing cash management, and tax, insurance, replacement and rollover reserves each at $0 initial with springing monthly funding. Sales history: gross mall sales of $118,936,449 (2023), $120,553,742 (2024), $120,889,708 (2025) and $121,699,639 for the twelve months ending 31 March 2026, with inline sales per square foot for tenants under 10,000 square feet of $352, $348, $340 and $341. https://www.sec.gov/Archives/edgar/data/1005007/000153949726002260/n6014_x12-424b2.htm
[2] Same prospectus, Annex A-3, Mortgage Loan No. 2, Tenant Summary footnotes (6) and (8), quoted in full in the body, and footnote (9), which reads “Tenant SF excludes temporary tenants. Temporary tenant square footage is included as Vacant Space.” Both co-tenancy descriptions are the underwriter’s summary of the lease, not the lease text. The leases are not filed, so the defined terms behind “gross leasable area,” “open and operating,” “occupancy of the landlord’s tract,” “scheduled rent” and “gross sales” are not available, and the prospectus uses “open and operating” in footnote (6) and “open for business” in the Major Tenants narrative for the same clause without explaining the difference.
[3] Same prospectus, in the discussion of underwritten net cash flow and occupancy. Source for the five categories of tenant reflected in reported occupancy, including tenants who “are ‘dark’ tenants but paying rent,” and for the quoted sentence that “In many cases, co-tenancy provisions were assumed to be satisfied and vacant space was assumed to be occupied and space that was due to expire was assumed to have been re-let, in each case at market rates that may have exceeded current rent.”
[4] Same prospectus, Annex A-3, Mortgage Loan No. 2, Underwriting and Financial Information and footnote (4) to that table. Most recent occupancy 92.9% as of 5 May 2026, 92.4% at 31 December 2025, 96.0% at 31 December 2024, each including temporary tenants; excluding temporary tenants the same dates read 80.4%, 80.3% and 80.8%. The narrative adds that the properties were “80.4% occupied by a granular rent roll consisting of approximately 61 permanent unique tenants (92.9% occupied including 12 temporary tenants),” with no tenant above 5.4% of net rentable area and the ten largest at 28.1% of underwritten base rent. Portfolio summary: Pismo Beach 147,603 square feet and $5,802,516 of underwritten net operating income; Queenstown 289,422 square feet and $6,487,523. The 12.5-point gap between the two occupancy measures is my arithmetic, as is the implied figure of roughly 54,600 square feet held by temporary tenants.
[5] Same prospectus, Annex A-3, Mortgage Loan No. 2, Major Tenants narrative for Old Navy. Source for the minimum rent of $21.21 per square foot with 2.0% annual escalations, percentage rent of 12.0% of annual gross sales in excess of a $4.0 million breakpoint, trailing twelve-month sales of $3.2 million ($249 per square foot) remaining below the breakpoint so that no percentage rent was required, the ten-plus-year tenancy and recent seven-year renewal, and the alternate rent mechanic: “if less than 70% of the total gross leasable area at the Queenstown Premium Outlets Property (excluding the Old Navy space and outlots) is open for business, the tenant may elect to pay an alternate rent equal to 75% of the minimum rent, which decreases to 50% if condition persists for more than 12 consecutive months. During the alternate rent period, percentage rent remains payable at the contractual rate and is not subject to reduction.” All dollar figures derived from the $21.21 rate are mine: $275,730 of annual minimum rent on 13,000 square feet, $206,797.50 at 75%, $137,865 at 50%, and $275,730 paid against $413,595 of full rent over the 18 months from trigger to surrender. Those hold the rate flat; the prospectus does not say whether the alternate rent is calculated on the escalated minimum rent in the then-current year.
[6] Same prospectus, Annex A-3, Mortgage Loan No. 2, Tenant Summary, based on the underwritten rent roll dated 5 May 2026 inclusive of rent steps through August 2027. Old Navy: 13,000 square feet, 3.0% of total square footage, $441,635 of annual underwritten rent at $33.97 per square foot, $3,239,353 of sales for the twelve months ending 31 March 2026 at $249.18 per square foot, 13.6% occupancy cost, lease expiring 30 June 2033, no renewal option. Guess: 10,600 square feet across both properties, 2.4% of square footage, $201,710 at $19.03 per square foot, $1,965,875 of sales at $185.46 per square foot, 10.3% occupancy cost, lease expiring 31 January 2028, no renewal option. Occupied total 351,348 square feet (80.4%) at $44.19 per square foot and $15,526,020 of underwritten rent; vacant space 85,677 square feet (19.6%). Coach: 10,527 square feet, $757 per square foot of trailing sales, 4.0% occupancy cost. The inference that Old Navy’s $441,635 is an all-in occupancy figure rather than minimum rent rests on 13.6% of $3,239,353 being $440,552; the prospectus does not reconcile the two numbers or state what the underwritten rent includes. The calculation that halving $275,730 of minimum rent takes about 31% off $441,635 follows from that inference, and 7% of Guess’s reported combined sales being $137,611 against $201,710 of underwritten rent is mine. Guess’s sales and rent are reported for both properties combined and its co-tenancy clause operates only at Pismo Beach, so that percentage describes the shape of the reduction rather than the amount Guess would pay.
[7] Same prospectus, Annex A-3, Mortgage Loan No. 2, Anchor and Major Tenant Sales History, as provided by the borrower sponsor as of 31 December for each year. Old Navy at Queenstown: $263, $254 and $248 per square foot for 2023, 2024 and 2025, and $249 for the twelve months ending March 2026. Guess across both properties: $214, $178, $180 and $185 over the same periods. The $307.69 per square foot Old Navy would need to reach a $4.0 million breakpoint on 13,000 square feet is my arithmetic.
[8] Same prospectus, Annex A-3, Mortgage Loan No. 2, Major Tenants narrative and Major Tenant Overview table for Nike Factory Store: 23,500 square feet combined, 5.4% of net rentable area, 4.0% of underwritten rent, $627,217 of underwritten rent, trailing sales of $15,536,854 at $661.14 per square foot, 4.0% occupancy cost, no termination option. At Queenstown, 13,000 square feet with $0 of base rent and percentage rent in lieu at 3.25% of gross sales, about $236,000 on trailing sales, expiring 31 May 2028 with no renewal options. At Pismo Beach, 10,500 square feet at $378,000 of base rent, expiring 30 September 2033, one five-year renewal option, after a recent 3,000-square-foot expansion and seven-year extension.
[9] Same prospectus, same tables, for Polo Ralph Lauren: 20,000 square feet combined, $184,199 of underwritten rent at $9.21 per square foot, trailing sales of $5,880,136 at $294.01 per square foot, 3.1% occupancy cost, percentage rent in lieu of base rent at 3.0% of gross sales at both properties, underwritten at $84,549 on Pismo Beach trailing sales of $2,818,295 and $91,855 on Queenstown trailing sales of $3,061,840, and a recent ten-year renewal at Queenstown running to 25 July 2036. Tenant Summary footnote (5) sets out the termination right: within 60 days after any measuring period ends, each being the twelve months from 1 December through 30 November, effective for the period from 1 December 2033 through 30 November 2034 and each one after, if gross sales from the premises do not exceed $4,500,000; and on 60 days’ notice any time on or after 31 January 2035.
[10] Same prospectus, Tenant Summary footnote (7) for The Children’s Place at Queenstown: 11,214 square feet combined, $417,928 of underwritten rent at $37.27 per square foot, sales not available, lease expiring 30 June 2036. “If landlord elects to relocate the premises, tenant may terminate the lease if the proposed relocation space is deemed unacceptable, provided notice is given within 30 days of the relocation notice. If tenant neither accepts the relocation space nor exercises its termination right, landlord may subsequently terminate the lease upon notice.”
[11] Same prospectus, Risk Factors, in the discussion of the retail sector and of anchor and major tenant dependence. Source for the quoted sentence about retailers at the mortgaged properties announcing closures or being in financial distress while other tenants hold co-tenancy clauses related to them, and for the general description of co-tenancy clauses and operating covenants that “permit those tenants or anchor stores to cease operating, reduce rent or terminate their leases if the anchor tenant, shadow anchor tenant or another major tenant goes dark, a specified percentage of the property is vacant or if the subject store is not meeting the minimum sales requirement under its lease.” The prospectus does not name the distressed retailers in that passage.
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