DBRS Confirms All Classes of BBCMS Trust 2015-VFM

DBRS Limited (DBRS) has today confirmed the ratings of the following Commercial Mortgage Pass-Through Certificates, Series 2015 VFM issued by BBCMS 2015-VFM:

-- 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 trends are Stable.

The rating confirmations reflect the continued stable performance of the transaction. This transaction originally closed in March 2015, consisting of a $280 million fixed-rate loan secured by the Vintage Faire Mall located in Modesto, California. Built in 1977, the subject is a 1.1 million square feet (sf) two-level super-regional shopping mall, of which 692,693 sf is collateral for this transaction. The subject is occupied by 125 national and regional tenants and features five anchor tenants. Macy’s Women’s & Children’s, Sears and Forever 21 are not included in the collateral, while JC Penney and Macy’s Men’s & Home serve as collateral for the loan. Historically, the property has performed well as overall mall occupancy has never dropped below 97.0% and has averaged 99.0% since 2009. There is a diverse tenant mix at the property, which draws a variety of customers to the mall. The borrower, The Macerich Company (Macerich), has expressed interest in bringing in higher-end tenants to the subject; however, given the high occupancy, it is difficult to offer space. At issuance, Macy’s, expressed interest in expanding its space by 40,000 sf to accommodate furniture sales, but this has not been completed to date. The loan benefits from being sponsored by Macerich, which is an experienced California-based REIT with significant financial resources and experience in operating regional malls.

According to the December 2015 rent roll, the collateralized portion of the mall was 98.3% occupied, representing an increase from issuance occupancy of 96.7%. The average base rental rate has also increased from the DBRS underwritten rental rate of $29.80 per square foot (psf) to $32.33 psf as of the most recent rent roll. There are 25 tenants, representing 11.6% of net rentable area (NRA), with lease expirations in 2016. The largest rollover tenant represents 1.5% of the NRA. The second-largest collateral tenant, Macy’s Men & Home, originally had a lease expiration of December 2016; however, according to the most recent rent roll, it has signed a five-year lease renewal at the same rental rate of $3.91 psf. According to the Q3 2015 financials, the annualized debt service coverage ratio (DSCR) was 1.59 times (x), which represents an increase when compared with the DBRS underwritten DSCR of 1.49x.

Overall mall sales have been strong and continue to experience growth year over year. According to the tenant sales report, the largest collateral tenant, JC Penney, reported YE2015 sales of $161.97 psf, representing a 2.2% increase when compared with its YE2014 sales of $158.56 psf. Macy’s Men’s & Home also experienced a 2.1% increase in sales from $153.00 psf at YE2014 to $156.24 psf at YE2015. Dick’s Sporting Goods experienced a slight decline of 1.1% in sales, reporting $286.34 psf at YE2015 compared with $289.53 psf at YE2014, while H&M experienced an increase of 6.5%, reporting $243.97 psf at YE2015 compared with $229.10 psf at YE2014. Overall in-line tenants with less than 10,000 sf experienced an increase of 6.6% year over year from $639.10 psf at YE2014 to $681.50 psf at YE2015.

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.

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