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 reflects the overall stable performance of the underlying collateral for the transaction, the Vintage Faire Mall, a super-regional mall located in Modesto, California. At the February 2019 remittance, the current balance is $258.4 million, down from the issuance balance of $280.0 million, representing a collateral reduction of 7.7% due to scheduled loan amortization. The subject was built in 1977 and comprises of 1.1 million square feet (sf), 692,693 sf of which is collateral for the trust loan. The mall is the primary shopping destination within the Modesto area, which is approximately 90 miles east of Oakland in a tertiary area of Northern California. Anchors include collateral tenants JCPenney, Macy’s Men’s & Home and Dick’s Sporting Goods (Dick’s) as well as non-collateral anchors Macy’s Women’s & Children’s and Forever 21. A former non-collateral anchor in Sears was recently closed. The loan is sponsored by Macerich and has a 11-year term, amortizing over a 30-year schedule, with no interest-only (IO) term.

The property is well occupied with a collateral occupancy of 99.2% as of the September 2018 rent roll. The largest collateral tenants are JCPenney (23.7% of the collateral net rentable area (NRA); through March 2022), Macy’s Men’s & Home (12.9% of the collateral NRA; through December 2021) and Dick’s (3.8% of the collateral NRA; through January 2022). Tenants collectively representing 7.4% of the NRA have leases that recently expired or will be expiring in 2019. DBRS notes that tenants representing 4.2% of NRA with lease expirations in or prior to January 2019 were still listed on the mall’s directory as of mid-February 2019, suggesting renewals were secured.

Sears (formerly 13.1% of the total mall NRA) vacated in January 2019 as part of the company’s bankruptcy filing and related rounds of store closures. Macerich acquired a 50% interest in the Sears box in April 2015 as part of a joint venture with Sears that resulted in Macerich holding a partial interest in nine Sears anchor boxes including the subject. Although the closure of a mall anchor is a negative event at face value, in the case of the subject property, DBRS believes the closure represents opportunity for redevelopment as Sears historically reported strong sales at the property, which were most recently reported at $184 psf for the trailing 12 months (T-12) ending September 2018, well ahead of the chain’s national average. Those sales figures suggest traffic for the space was healthy and will likely be conducive to attracting another retailer or retailers for that box that would be an even bigger draw for today’s changing consumer tastes.

In addition to strong sales for Sears, the T-12 ending September 2018 tenant sales report showed overall strong in-line sales performance for the property. Excluding Apple, tenants occupying less than 10,000 sf reported T-12 sales of $618 per square foot (psf), a 1.4% decline from year-end (YE) 2017, but a 7.4% increase from issuance sales of $576 psf. Anchors JCPenney, Macy’s Men’s & Home and Macy’s Women’s & Children reported sales of $158 psf, $301 psf and $184 psf, respectively. Forever 21, which occupies a very large traditional anchor box of 154,518 sf, reported sales of $50 psf, while Dick’s reported sales of $272 psf. In general, anchor sales were flat to down slightly from the previous year.

The loan continues to exhibit strong performance with a T-9 ending 2018 debt service coverage ratio (DSCR) of 1.71 times (x), compared with the YE2017 DSCR of 1.72x, YE2016 DSCR of 1.68x and a DBRS term DSCR at issuance of 1.49x.

Class X is an IO certificate that references 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this loan.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. 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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada