DBRS Confirms Ratings of Citigroup Commercial Mortgage Trust 2013-SMP

DBRS has today confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2013-SMP (the Certificates), issued by Citigroup Commercial Mortgage Trust 2013-SMP, as follows. The trends remain Stable.

-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)

Classes X-A and X-B balances are notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

The transaction consists of the fee and leasehold interest in a super-regional mall located in downtown Santa Monica, California. The fee interest relates to the department store anchors and all shop space, with the exception of three small tenants. The leasehold interest relates to the two parking structures and 1,805 sf of exterior store space located on the property’s perimeter at the base of one of the garages.

The subject property is extremely well-positioned on 9.9 acres, only two blocks from the Pacific Ocean. Macerich is considered to be a strong sponsor with significant national relationships and financial resources, currently operating approximately 60 regional and super-regional malls across the United States, with a total market capitalization of $9.5 billion. Macerich spent over $415 million on a redevelopment project from 2008-2010, in which the mall was completely modernized, giving extremely attractive curb appeal due to innovative designs and the use of high-quality materials.

The modernized property has earned the LEED gold designation and has won numerous design awards, including the MAPIC High Street Award and the VIVA Design/Development Award. Furthermore, the property benefits from a diverse and high-profile tenant roster with a strong market demand.

The rating confirmations reflect the overall stability of the loan performance since closing in March 2013, the low-leverage financing and the high quality of the asset. Since issuance, the loan has seen a collateral reduction of 2.8% as a result of amortization, with a current trust balance of $232.5 million. As of July 2014, the property was approximately 93% occupied, and according to the June OSAR, the loan reported a debt service coverage ratio (DSCR) of 1.63 times (x), which compares to the DSCR at issuance of 1.55x.

At issuance and as part of this analysis, DBRS gave no credit to the vacant rental space (40,583 sf) located on the third floor. The borrower has recently announced its plans to add ArcLight Cinemas as soon as late spring of 2015. The addition of this tenant would result in a significant addition to the cash flow and value of the property.

Tenant rollover in the near term is minimal. There are only four tenants with leases expiring through the remainder of 2014, each representing less than 0.46% of the rental revenue. Additionally, there are only four tenants with leases expiring through 2015, each representing less than 0.44% of the rental revenue.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool. The April 2014 Monthly CMBS Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance (November 2012), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.