DBRS Confirms Ratings of BAMLL Commercial Mortgage Securities Trust 2014-IP

DBRS Limited (DBRS) has today confirmed all classes of BAMLL Commercial Mortgage Securities Trust 2014-IP as follows:

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

All trends are Stable.

The current performance of the transaction remains in line with DBRS’s expectations at issuance. The transaction closed in June 2014 and comprises a $440 million first mortgage loan secured by Independence Plaza, a mixed-use residential and commercial complex located in Manhattan, New York, built in 1975. The property consists of three 39-story apartment towers and several townhomes, along with commercial space located on the ground levels and second floors of the buildings. The buildings are located at 310 Greenwich Street, 40 Harrison Street and 80 North Moore Street in downtown Manhattan within the Tribeca neighborhood, a highly desirable area. The subject was originally built under the Mitchell-Lama Housing Program; however, the property exited the program in June 2004. The program offered affordable housing for lower- and middle-income families through tax breaks and subsidized mortgages. Beginning in 2004, the subject instituted The Landlord Assistance Program (LAP), which offered initial below-market rent and annual rent increases to tenants who did not qualify for the Section 8 Enhanced Voucher program (Section 8).

Upon exiting the Mitchell-Lama Housing Program, the sponsors, Vornado Realty L.P. (Vornado) and Stellar, have spent $25.8 million on building and unit renovations to achieve market rental rates. At issuance, approximately 550 units (41.5% of the residential unit count) had been renovated. The sponsors plan to continue to renovate units as tenants occupying units under the Section 8 and LAP programs move out of the property. According to Q3 2014 reporting, the residential portion of the property was 95.0% occupied with an average rental rate per unit at the subject of $3,470 compared with the market average rental rate of $4,221 per unit, according to Reis. Excluding the Section 8 and LAP tenants, the average rental rate per unit is $4,493.

The commercial component of the subject consists of 72,500 sf of retail space and a 230,000 sf five-story parking garage. The commercial space is currently 100.0% occupied, with tenants including a grocery store, elementary school and other food- and service-orientated retailers. While the elementary school is expected to outgrow its space at the subject and ultimately vacate the property, DBRS expects the experience of Vornado to greatly benefit the commercial component of this property. Beyond having the ability to identify and sign replacement tenants if the need arises, Vornado is planning to install of a refreshed streetscape of the retail space, which will improve the overall prestige of the entire property. According to Q3 2014 reporting, the loan continues to exhibit strong performance with a 3.58 times debt service coverage ratio.

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 CMBS Surveillance (January 2015), which can be found on our website under Methodologies.