DBRS Confirms the Ratings on BAMLL Trust 2011-FSHN

DBRS Limited (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 rating confirmations reflect that the transaction’s current performance has remained in line with expectations. 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. According to the December 2014 financials, the YE2014 debt service coverage ratio was 2.43 times (x) compared with 2.35x at YE2013 and 2.25x at issuance.

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 offers a variety of mid-scale to luxury tenants, including the Apple Store, The Gap, Forever 21, Victoria’s Secret, Coach, Hugo Boss and Cole Haan. According to the March 2015 rent roll, the collateral was 97.3% occupied. While this figure is down slightly from 99.3% at issuance, mall occupancy has historically been in the upper 90% range. As per the February 2015 site inspection, the property is undergoing interior and exterior renovations at an estimated cost of $10 million. DBRS is currently awaiting the servicer’s response on the anticipated completion date.

According to the December 2014 Tenant Sales Report, Macy’s and in-line sales have slightly decreased since 2013 and issuance; however, sales performance is still considered strong. Macy’s reported YE2014 sales of $304.05 psf, a 5.6% decrease from YE2013 sales of $322.07 psf. Tenants occupying less than 10,000 sf reported sales of $1,014.30 psf, a 1.5% increase from YE2013 sales of $999.49 psf, while tenants occupying more than 10,000 sf reported sales of $508.97 psf, a 16.9% decrease from YE2013 sales of $612.74 psf.

The property’s continued 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 March 2015, the Bureau of Labor and Statistics reported a preliminary unemployment rate of 3.1% for Arlington County compared with the national average of 5.6%. The Arlington County Planning Division reported an estimated median household income of $106,400 for the county in 2015. According to Reis, there was an average vacancy rate of 3.3% for anchored space in the Arlington/Alexandria submarket and an average vacancy rate of 8.6% for non-anchored space as of Q1 2015. Although these figures are for much smaller shopping centres 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 June 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.

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.

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.