DBRS Confirms All Classes of BBCMS Trust 2015-VFM

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2015-VFM issued by BBCMS 2015-VFM as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 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 stable performance of the transaction since issuance. The loan is secured by the Vintage Faire Mall, a super-regional mall located in Modesto, California. The subject was built in 1977 and comprises 1.1 million square feet (sf), of which 692,693 sf is collateral for the loan. The mall is anchored by non-collateral tenants Macy’s Women’s & Children’s, Sears and Forever 21 and collateral tenants JCPenney and Macy’s Men’s & Home. The subject faces only minimal true competition as the closest retail development is The Promenade Shops at Orchard Valley, an outlet center located 15.0 miles away, and the closest regional enclosed mall is West Valley Mall, which is located almost 30.0 miles away. The loan is sponsored by The Macerich Company (Macerich), an experienced California-based real estate investment trust.

As at the YE2017 rent roll, the subject was 98.9% occupied, compared with the YE2016 occupancy rate of 98.4% and YE2015 occupancy rate of 99.1%. The largest collateral tenants include JCPenney, representing 23.7% of the collateral net rentable area (NRA); Macy’s Men’s & Home, representing 12.9% of the collateral NRA; and DICK’S Sporting Goods, representing 4.8% of the collateral NRA. All three tenants are on leases expiring in 2022, with JCPenney and Macy’s Men’s & Home both recently renewing their leases in January 2017 and December 2016, respectively, at the same rental rates.

According to the trailing 12 months (T-12) ending December 2017 tenant sales report, overall mall sales were reported at $315 per square foot (psf), representing a slight decline from the T-12 ending December 2016 sales of $319 psf. In-line sales for retailers with less than 10,000 sf were down 1.3% year-over-year (YOY), reporting $707 psf when including the Apple Store’s sales and $627 psf when excluding Apple Store sales. For the largest three collateral tenants (JCPenney, Macy’s Men’s & Home and DICK’S Sporting Goods), sales have remained stable as these stores reported T-12 December 2017 sales of $168 psf, $158 psf and $267 psf, respectively, compared with the T-12 December 2016 sales of $169 psf, $158 psf and $264 psf, respectively. Non-collateral anchors Forever 21, Sears and Macy’s Woman’s & Children reported T-12 December 2017 sales of $50 psf, $184 psf and $301 psf, respectively, compared with the T-12 December 2016 sales of $65 psf, $184 psf and $301 psf, respectively.

In April 2015, Sears Holdings Corporation (Sears) and Macerich formed a joint venture (JV) where Sears sold a 50.0% stake in nine of its stores located in Macerich-operated malls for $150.0 million. As a result of this transaction, the Sears at the subject operates under a master lease with the JV, which is allowed to recapture specified portions of the space that is leased to Sears. If recaptured, the space can be re-leased to other tenants, which could result in higher rental rates and/or more attractive tenants moving into the affected properties. The malls selected for the JV, including the subject mall, all exhibited strong in-line sales at the time of purchase, suggesting potential for a better use of space utilized by Sears, a retailer generally on the decline.

Based on the most recent financials dated September 2017, the loan reported a debt service coverage ratio (DSCR) of 1.68 times (x), which was in line with the YE2016 and YE2015 DSCR of 1.68x. At issuance, the DBRS Term DSCR was 1.49x.

Class X is an interest-only (IO) certificate that references multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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