DBRS Confirms All Classes of MSC 2011-C3 Mortgage Trust

DBRS Limited (DBRS) confirmed the ratings of all classes of Commercial Mortgage Pass-Through Certificates, Series 2011-C3 issued by MSC 2011-C3 Mortgage Trust as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-J at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (sf)
-- Class F at BBB (low) (sf)
-- Class X-B at BB (low) (sf)
-- Class G at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance, when the collateral consisted of 63 fixed-rate loans secured by 76 properties, with an original trust balance of $1.5 billion. As of the July 2018 remittance, 44 loans remain in the pool with an aggregate principal balance of $905.0 million, representing a collateral reduction of 39.4% since issuance due to scheduled loan amortization and loan repayments.

As of the July 2018 remittance, approximately 93.2% of the pool reported YE2017 financials, with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.86 times (x) and 13.4%, respectively, compared with the WA DBRS Term DSCR and DBRS Debt Yield figures at issuance of 1.70x and 10.8%, respectively. In addition to the overall improved credit metrics for the underlying loans, the pool also benefits from defeasance, as three loans collectively representing 1.5% of the pool have been fully defeased as of the July 2018 remittance. Two loans, representing 15.6% of the current pool, mature in 2019 and reported a WA exit debt yield of 16.3%, as based on the most recent year-end cash flows for each. In addition, the largest loans in the pool are performing quite well. Per the YE2017 financials, the top 15 loans, which collectively represent 52.8% of the pool, reported a WA DSCR of 1.91x, compared with the WA DBRS Term DSCR at issuance of 1.55x, representing net cash flow (NCF) growth of 26.2% over DBRS NCF figures derived at issuance.

According to the July 2018 remittance, there are four loans, representing 13.2% of the pool, on the servicer’s watchlist (including the largest loan in the pool) and no loans in special servicing. The largest loan, Park City Center (Prospectus ID#1, 10.3% of the pool), is secured by a regional mall in Lancaster, Pennsylvania (owned and operated by GGP), and was added to the servicer’s watchlist in April 2018 because anchor tenant Bon-Ton (14.7% of the net rentable area) filed for Chapter 11 bankruptcy and, as of July 2018, is in the process of closing the store as part of the chain’s liquidation. This loan also matures in June 2019 and does have some refinance risk due to its secondary location and high concentration of anchor tenants reporting declining sales; however, in-place cash flows have been quite strong for the life of the loan, with the most recent full-year reporting showing a YE2017 DSCR of 2.47x and an implied exit debt yield of 16.9%. The pool has significant exposure to higher-risk enclosed malls, as three loans, representing 23.4% of the pool, are secured by regional malls in secondary markets. Belden Village (Prospectus ID#2, 6.7% of the pool) and Oxmoor Center (Prospectus ID#3, 6.3% of the pool) both mature in 2021 and currently report strong refinance metrics and benefit from low leverage. For additional information on all three of these malls, please see the loan commentary on the DBRS Viewpoint platform for which information is provided below.

At issuance, DBRS shadow-rated Washington Tower (Prospectus ID#13, 4.3% of the pool) and 420 East 72nd Street Coop (Prospectus ID#33, 1.2% of the pool) investment grade. DBRS confirmed that the performance of these loans remains consistent with investment-grade characteristics. Park City Center was also shadow-rated investment grade at issuance, but DBRS has removed the shadow rating with this review to reflect a more conservative scenario, given the anchor tenant’s departure near the 2019 maturity date.

Classes X-A and X-B are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Park City Center (Prospectus ID#1, 10.3% of the pool)
-- Westfield Belden Village (Prospectus ID#2, 6.7% of the pool)
-- Oxmoor Center (Prospectus ID#3, 6.3% of the pool)
-- Granada Hills Town Center (Prospectus ID#12, 2.7% of the pool)
-- Washington Tower (Prospectus ID#13, 2.7% of the pool)
-- Park Place Tower (Prospectus ID#16, 1.8% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS-rated transactions.

The ratings assigned to Classes D, E, F and G materially deviate from the higher ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted given uncertain loan level event risk.

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.

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.

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