DBRS Confirms Ratings on BAMLL Commercial Mortgage Securities Trust 2013-WBRK

DBRS Limited (DBRS) has today confirmed the ratings on the Commercial Mortgage Pass-Through Certificates issued by BAMLL Commercial Mortgage Securities Trust, Series 2013-WBRK as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since closing, which is in line with DBRS’s expectations at issuance. The transaction closed in April 2013 and consists of a $360 million loan secured by the fee and leasehold interest in Willowbrook Mall, an enclosed, partial two-story super-regional mall located in Wayne, New Jersey. The fee interest consists of approximately 495,000 square feet (sf) of major tenant and in-line space while the leasehold interest consists of approximately 28,000 sf of in-line space subject to a long-term ground lease with Lord & Taylor. The mall is anchored by Bloomingdale’s, Macy’s, Lord & Taylor and Sears, which do not serve as collateral for the loan. The property is well located with a 2015 population of 1.37 million within a ten-mile radius, coupled with strong income demographics as median household income is $69,839 within a ten-mile radius and $84,851 within a five-mile radius of the property.

The mall was built in 1969 and was most recently renovated in 2004 by the previous owner before being purchased by the current sponsor, General Growth Properties Inc. According to a June 2015 news article published by NorthJersey.com, the property is undergoing a renovation project to revitalize the look of the mall, which commenced in June 2015. Improvements will include a new mall entrance, a re-designed food court layout, installation of new lights and other upgrades to common-area amenities. The structure of the mall will not change and no additional leasable square footage will be added to the property. It was known at closing that the borrower was contemplating this project, but plans were not finalized at that time. According to a July 2015 news article published by Chron.com, the estimated cost of the project is expected to exceed $10 million with an anticipated completion date in late fall of 2016, which surpassed the original renovation timeline of two years. DBRS has asked the servicer to confirm this information. Construction work is being performed over night and was halted during the holiday shopping season to prevent further disruption for shoppers.

The property continues to exhibit strong occupancy rates with occupancy at or above 97.0% since issuance. According to the September 2015 rent roll, mall occupancy was 99.0% with an in-line occupancy of 96.4%. Major in-line tenants include Old Navy (5.0% of the net rentable area (NRA); lease expires in August 2016), Gap/Gap Kids (3.8% of the NRA; lease expires September 2024) and Forever XXI (3.1% of the NRA; lease expires in January 2019). According to the servicer, the borrower is currently in negotiations with Old Navy to relocate the tenant into a brand new two-level space commencing in 2016 with an expected lease term of ten years. DBRS has requested the details of the new lease terms from the servicer and is awaiting a response. Nineteen tenants, occupying 14.0% of the NRA, have leases that have expired or will be expiring in 2016; however, three tenants (1.5% of the NRA) have either renewed the leases at the same or increased rental rates or the space was leased out to a new tenant at a similar rental rate. Three other tenants (2.1% of the NRA) had leases that expired in January 2016, but are still at the property according to the mall directory. Leasing activity has been strong at the property as eight tenants (5.6% of the NRA) have renewed or signed a new lease in 2015. Notable tenants include Microsoft which replaced Guess, Against All Odds which replaced Lane Bryant and Kids Footlocker which replaced P.S. From Aeropostale. According to the September 2015 rent roll, the mall-wide average rental rate was $59.67 per square foot (psf) with a vacancy rate of 1.0% including the anchor tenants, which is above the Passaic Route 46/23 submarket of Northern New Jersey triple net rent of $22.00 psf and vacancy rate of 4.4% for eight comparable retail properties, as reported by CoStar in March 2016.

The tenant sales report for the trailing 12-month period ending September 2015 (T-12) showed consistency in overall in-line sales performance for the property compared with YE2014 figures, with tenants occupying less than 10,000 sf reporting T-12 sales of $764.00 psf, a 1.6% increase from $752.00 psf at YE2014, and tenants occupying more than 10,000 sf reporting T-12 sales of $503.00 psf, a 0.2% increase from $502.00 psf at YE2014. Apple reported a T-12 sales figure of $5,953 psf, which is a 3.3% increase from $5,762 psf at YE2014, while Old Navy reported a T-12 sales of $524.00 psf, a 0.6% decrease from $527.00 psf at YE2014. The property continues to exhibit strong performance with a Q3 2015 debt service coverage ratio (DSCR) of 2.88 times (x), a decrease from YE2014 DSCR of 2.98x but an improvement from the YE2013 DSCR of 2.78x and the DBRS underwritten DSCR of 2.40x. The slight decline in Q3 2015 net cash flow from the YE2014 figure is a result of a decrease in expense reimbursements, percentage rent and parking income; however, DBRS expects these figures to improve by YE2015 when the figures are fully reported.

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 (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.