DBRS Assigns Provisional Ratings to BBCMS Trust 2015-VFM

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-VFM (the Certificates) issued by BBCMS Trust 2015-VFM. The trends are Stable.

-- Class A1 at AAA (sf)
-- Class A2 at AAA (sf)
-- Class X at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (sf)

All classes will be privately placed.

The collateral for the transaction consists of the fee and leasehold interest in an enclosed, two-level, regional mall located in Modesto, California. Of the 1.1 million sf at the mall, the collateral consists of 692,693 sf of anchor, major and in-line space currently occupied by 125 national and regional tenants. The subject features five anchor tenants: Macy’s Women’s & Children’s, Macy’s Men’s & Home, JCPenney, Sears and Forever 21. Macy’s Women’s & Children’s, Sears and Forever 21 do not serve as collateral for the loan. The property is directly owned by The Macerich Company (Macerich) and is managed by an affiliate of the borrower. In December 2014, Macerich paid off the previously existing $97.6 million of mortgage debt on the subject property. Proceeds from the loan will be used to return approximately $277.2 million of equity to the sponsor, as well as fund reserves and cover closing costs totaling $2.8 million. Macerich has owned and operated the property for nearly two decades and has invested approximately $58.0 million in renovations since that time.

Vintage Faire Mall has performed very well historically, with occupancy averaging 99.0% since 2009. As of the January 31, 2015, rent roll, the entire mall was 98.0% occupied including temporary tenants, and 96.3% occupied when excluding temporary tenants. As of the same time period, collateral occupancy was 97.9% and 94.3% when including and excluding temporary tenants, respectively. Sales productivity is quite strong, with YE2014 reporting total gross mall sales of $343.5 million inclusive of the anchor tenants and comparable sales of $633 psf including Apple, which decreases to $576 psf when excluding Apple. This is approximately a 30.8% increase over YE2008 sales, or approximately $484 psf.

The loan has an 11-year term, amortizing on a 30-year schedule and no interest-only term, resulting in 25.3% loan amortization over the term. Due to the substantial amortization, the loan has low default risk during the term with a relatively high DBRS Term debt service coverage ratio (DSCR) of 1.49 times (x). The DBRS Refinance DSCR is a healthy 1.34x, based on a stressed 8.000% refinance constant that implies a 7.02% interest rate and a 30-year amortization schedule. This stressed refinance rate is 3.53% above the current loan’s interest rate of 3.49%. The DBRS Value, a 43.5% discount to the appraised value, results in a high loan-to-value (LTV) of 96.8%, which reduces to a 72.3% LTV at loan maturity due to the substantial amortization.

As a result of consistent performance, strong sales, an experienced mall operator, a high DBRS Term DSCR of 1.49x and the approximately 25.3% amortization that occurs during the 11-year loan term, the Certificates backed by the $280 million first mortgage debt are provisionally assigned ratings between AAA (sf) and BBB (sf). The transaction is a sequential-pay structure.

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

All classes will be privately placed.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.

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

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.