DBRS Confirms Ratings on Goldman Sachs Mortgage Securities Corporation Trust 2012-ALOHA

DBRS Limited (DBRS) has today confirmed its ratings on the following classes of GS Mortgage Securities Corporation Trust 2012-ALOHA, Commercial Mortgage Pass-Through Certificates, Series 2012-ALOHA:

-- 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)

All trends are Stable.

This is a single-borrower transaction that closed in May 2012. The collateral consists of the fee interest in a super-regional mall, an office building and a small unanchored retail center as well as the partial fee, partial leasehold interest in an additional office building. At issuance, the subject was owned and operated entirely by General Growth Properties, Inc. (GGP). In March 2015, a 25% stake was sold to AustralianSuper, an Australian industry fund with over $84 billion under management. GGP is considered a strong owner and operator of super-regional malls with long-time experience in the retail industry and will retain management responsibilities and majority ownership interest in the property.

The largest portion of the loan’s collateral is the mall, Ala Moana Center. Because of its strong sales, location near Waikiki Beach and its extremely large size, the mall is considered one of the top malls in the United States. Approximately 40% of sales at the mall is generated through tourist traffic as it attracts many foreign tourists from Japan, China and Korea. Ala Moana Center was built in 1959 and has undergone several renovations and expansions since then. About 660,000 sf of new space is expected to be completed and open to the public at the end of 2015. The new addition, which will not serve as collateral for the loan, includes about 350,000 sf previously occupied by Sears. In accordance with the loan agreement, the Sears parcel was released by the borrower in 2012 and subsequently demolished for redevelopment. Bloomingdale’s is slated to anchor the new expansion, which will also include the relocation of Nordstrom and the addition of several major tenants and in-line stores as well as new parking decks. Tenant relocations between the existing mall structure and addition are allowed, conditional upon certain performance thresholds. The Q3 2014 annualized debt service coverage ratio (DSCR) was 2.55 times (x), which represents an increase from the YE2013 DSCR of 2.40x. The DBRS underwritten DSCR was 2.21x.

According to the Tenant Sales Report for December 2014, the in-line tenant sales have increased since issuance and continue to exhibit strong performance. Tenants with less than 10,000 sf report sales of $1,332 psf as of T-12 ending December 31, 2014, and $914 psf for in-line tenants with more than 10,000 sf for the same period. Anchor tenant, Macy’s, also continues to exhibit strong performance, reporting sales of $384 psf for the same period, an improvement over $351 psf for the T-12 ending January 31, 2012, and almost double the national average.

Based on a rent roll dated December 2014, Ala Moana Center is 92.3% occupied and Ala Moana Plaza is 100% occupied. The two office buildings, Ala Moana Building and Ala Moana Pacific Center, are operating at lower occupancy rates of 81.4% and 87.1%, respectively, in comparison. These two properties only account for 5.9% of DBRS underwritten net cash flow, mitigating the impact of any underperformance. There is minimal tenant rollover in 2015 at 3.5% of total net rentable area (NRA), with an additional 1.0% of total NRA with signed leases that have not yet been occupied. Macy’s original lease was set to expire in December 2015; however, the tenant has recently executed its option to renew until December 2025.

DBRS continues to monitor this transaction, with additional information on the DBRS viewpoint for this transaction.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are 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.

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

All classes are privately placed pursuant to Rule 144A. The Class X-A and Class 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 applicable methodologies are North American CMBS Rating Methodology (March 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.