DBRS Confirms Ratings of Citigroup Commercial Mortgage Trust 2013-SMP

DBRS Limited (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:

-- 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)

The trends remain Stable.

The rating confirmations reflect the overall stability of the loan performance since issuance, the low-leverage financing and the high quality of the asset. The transaction consists of the fee and leasehold interest in a super-regional mall (513,061 square feet) 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, while the leasehold interest relates to the two parking structures and 1,805 square feet of exterior store space located on the property’s perimeter at the base of one of the garages. Since issuance, the loan has experienced total collateral reduction of 4.6% due to scheduled loan amortization. According to YE2014 reporting, the loan had a debt service coverage ratio (DSCR) and debt yield of 1.66 times (x) and 9.2%, respectively, compared to DBRS underwritten figures of 1.55x and 8.2%, respectively.

The subject property is well positioned on 9.9 acres, two blocks from the Pacific Ocean. The subject is sponsored by Macerich, an experienced owner and operator of shopping malls with significant national relationships and financial resources. It currently operates approximately 60 regional and super-regional malls across the United States, with a total market capitalization of $12.6 billion. Macerich spent over $415 million on a redevelopment project from 2008 to 2010, completely modernizing the subject, giving it extremely attractive curb appeal due to innovative designs and the use of high-quality materials. The modernized property 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.

According to the December 2014 rent roll, the property was 94% occupied, compared to 95% at issuance. Anchor tenants include Nordstrom (23.7% of net rentable area (NRA) expiring in February 2026) and Bloomingdale’s (19.8% of NRA expiring in September 2020). In general, tenant rollover prior to the Bloomindale’s expiration date is minimal as only 11 tenants representing 3.5% of the NRA have lease expirations prior to 2020. At issuance and as part of this rating action, DBRS gave no credit to the vacant space (40,583 square feet) located on the third floor above Bloomingdale’s. According to the servicer, however, the borrower has announced that a 21-screen ArcLight Cinemas (9.5% of NRA) will open in the future with no set opening date determined at this time. The tenant has signed a 15-year triple net lease, which will begin 15 days after the soft opening date, which is considered effective on the first day the tenant operates eight or more screens open to the public. The addition of this tenant is expected to generate additional cash flow and to increase the value of the property.

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 May 2015 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 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.

The applicable methodologies are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com