DBRS Confirms All Classes of MSCCG Trust 2015-ALDR

DBRS Limited (DBRS) has today confirmed the Commercial Mortgage Pass-Through Certificates, Series 2015-ALDR issued by MSCCG Trust 2015-ALDR as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X-A 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 the stable performance of the transaction. The original $355 million whole loan consists of six separate notes, four of which are pari passu notes included in this transaction. The original trust amount of $255.6 million has experienced collateral reduction of approximately 2.9% as a result of scheduled amortization since issuance. The loan is secured by a super-regional mall with two open-air sections located in Lynnwood, Washington, approximately 17.5 miles north of Seattle. The subject is owned by affiliates of General Growth Properties, Inc. (GGP), which manages the property and is considered a strong sponsor given its wealth of mall ownership and operating experience, and the New York State Common Retirement Fund, forming the joint venture GGP/Homart II LLC.

The collateral portion of the property consists of 575,704 square feet (sf) of the 1.3 million sf Alderwood Mall. Anchor tenants include Macy’s (18.2% of the total net rentable area (NRA), expiring November 2019); JCPenney (11.6% of the total NRA, expiring September 2053); Loews Cineplex (Loews); and Nordstrom (11.2% of the total NRA, expiring November 2019), of which only Loews serves as collateral for the loan.

The former anchor, Sears, which previously occupied a 177,679 sf box, announced in January 2017 that it would be closing its location at the subject as part of a round of closures scheduled for the company throughout the country. The tenant vacated at the end of March 2017. The Sears parcel is owned by a joint venture between Sears and GGP, providing the sponsor with increased control over the fate of the empty box. According to online sources, the space is being evaluated for major remodelling and repurposing, which would introduce an entertainment and food village to the property. Reportedly, potential tenants for the space include Dave & Buster’s (40,000 sf) and DICK’S Sporting Goods (70,000 sf). DBRS has requested details on the plans for the space from the servicer and will continue to monitor for developments. Also of note is that a nearby competitor, Everett Mall, located 13.0 miles north of the subject, recently saw the departure of its 133,000 sf Macy’s anchor in the spring of 2017.

As of December 2016, the collateral portion of the mall was 96.6% occupied. The largest collateral tenants include Loews (13.6% of the collateral NRA, expiring December 2025); REI (4.4% of the collateral NRA, expiring January 2020); and Forever 21 (4.2% of the collateral NRA, expiring January 2022). As of YE2016 reporting, the loan reported a debt service coverage ratio (DSCR) of 1.73 times (x) compared with the YE2015 DSCR of 1.71x and the DBRS issuance DSCR of 1.58x.

Although down year over year, overall mall sales continue to be strong, with the sales report for the trailing 12 months (TTM) ending December 2016 showing total in-line sales of $573 per square foot (psf) compared with the TTM ending December 2015 total in-line sales of $602 psf, representing a decline of 4.9%. The major driver for the decline is attributable to Apple’s sales, which reported a 21.8% decline to $11,479 psf as of the TTM ending December 2016 from the TTM ending December 2015 sales of $14,683 psf. Anchor tenant Loews reported a 22.5% growth in sales over the same period to $824,720 per screen from $673,121 per screen. Forever 21 also reported a slight increase in sales of 1.1% to $185 psf from $183 psf. For in-line tenants above and below 10,000 sf, sales saw declines of 5.6% to $332 psf from $352 psf and 4.7% to $654 psf from $679 psf, respectively.

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 principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

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