DBRS Confirms the Ratings of BAMLL 2011-FSHN

DBRS has today confirmed the ratings of five classes of Banc of America Large Loan 2011-FSHN as follows:

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

All trends are Stable.

The transaction consists of a $410 million fixed rate, interest-only loan secured by a 601,633 square foot (sf) portion of the 821,048 sf upscale super-regional mall, Fashion Centre at Pentagon City, located in Arlington, Virginia. The property is part of a mixed-use development that includes a Ritz- Carlton hotel and an attached 170,000 sf Class A office building, both of which do not serve as collateral for the loan. The property has performed as expected since issuance, as the YE2013 debt service coverage ratio of 2.35 times (x) compared with 2.25x at issuance and 2.33x at YE2012. The rating confirmations reflect the continued stable performance of the transaction.

The mall was constructed in 1989 and is anchored by a non-collateral Nordstrom and a Macy’s department store. Macy’s owns its space and operates on a ground lease, expiring in 2020 with 12, five-year renewal options to extend the lease through 2080 with no increase in fixed rent. The property has approximately 125 in-line retailers, offering a variety of mid-scale to luxury tenants, including the Apple Store, The Gap, Forever 21, Victoria’s Secret, Banana Republic, Coach, Hugo Boss, Cole Haan and Armani Exchange. According to the March 2014 rent roll, the collateral was 97.5% occupied. While this figure is down from 99.3% at issuance, mall occupancy has historically been in the upper 90% range. YE2013 sales continue to be strong as Macy’s reported sales of $322 per square foot (psf), in-line tenants occupying greater than 10,000 sf reported sales of $613 psf and in-line tenants occupying less than 10,000 sf had sales of $999 psf. Excluding the Apple Store, which had sales of $9,456 psf, in-line stores occupying less than 10,000 sf had sales of $820 psf. While YE2013 sales decreased slightly from the YE2012, sales volumes remain up from issuance.

The property’s continued strong performance is a reflection of its desirable location in a densely populated trade area with high levels of disposable income that significantly outpace the national average. As of May 2014, the Bureau of Labor and Statistics reported a preliminary unemployment rate of 3.7% for Arlington County, compared to the national average of 6.1%. The Arlington County Planning Division reported an estimated median household income of $106,200 for the county in 2014. According to Reis, there was an average vacancy rate of 4.8% for anchored space in the subject’s Arlington/Alexandria submarket and an average vacancy rate of 7.0% for non-anchored space as of Q1 2014. Although these figures are for much smaller shopping centers and do not include statistics for regional malls, they are indicators of a relatively healthy local retail market.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction. The July 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.

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

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.