DBRS Morningstar Confirms All Ratings of BBCMS Trust 2015-VFM, Changes Trends on Three Classes

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-VFM issued by BBCMS Trust 2015-VFM:

-- 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)

DBRS Morningstar changed the trends on Classes C, D, and E to Stable from Negative. All other trends remain Stable. DBRS Morningstar previously maintained Negative trends for Classes C, D, and E as a reflection of concerns surrounding the cash flow declines for 2020 and sales declines as of the trailing 12 months (T-12) ended June 2021 as compared with pre-Coronavirus Disease (COVID-19) pandemic levels. The rating confirmations and Stable trends with this review reflect DBRS Morningstar’s overall improved outlook of the collateral given the information received that showed improved tenant sales, cash flow improvements by YE2021, and occupancy improvements that included a new anchor tenant, Dave & Buster’s.

The collateral consists of the fee and leasehold interest in a 692,700-square-foot (sf) portion of Vintage Faire Mall, a super-regional mall in Modesto, California. The property is the only super-regional mall within a 50-mile radius and is the largest enclosed shopping mall between Fresno and Sacramento, California. The property is anchored by collateral tenants Macy’s Men’s & Home and JCPenney and is shadow anchored by noncollateral tenant Macy’s Women’s & Children’s. After former-anchor-tenant Sears vacated the property in 2019, the sponsor was able to backfill the space with Dick’s Sporting Goods in October 2020 and Dave & Buster’s, which recently opened in May 2022. The loan sponsor is Macerich, a publicly traded real estate investment trust and one of the largest mall owners and operators in the United States.

The $280 million 11-year loan amortizes over 30 years and is scheduled to mature in March 2026. As of the August 2022 remittance, the loan balance has amortized to $236.4 million, representing a collateral reduction of 15.6% from issuance.

As of March 2022, the collateral portion of the property was 88.9% occupied, and the mall as a whole was 93.4% occupied, increasing from 83.2% at YE2021. DBRS Morningstar notes the servicer’s reporting for this transaction has historically shown occupancy rates for the mall as a whole and not the collateral portion. Several new tenants have recently opened, including JD Sports, Dave & Buster’s, and Bob’s Discount Furniture. The largest collateral tenants are JCPenney (23.3% of the net rentable area (NRA)) and Macy’s Men’s & Home (12.8% of NRA). According to the March 2022 rent roll, 13.7% of NRA is scheduled to roll within the next 12 months. According to the year-to-date sales report for the period ended March 31, 2022, the T-12 in-line sales for tenants less than 10,000 sf (excluding Apple) was $801 per square foot (psf), increasing 41.6% from $468 as of the T-12 sales report ended June 30, 2021, and rebounding above the $753 psf achieved at YE2019. As of YE2021, cash flows and the debt service coverage ratio have increased slightly but remain relatively in line with YE2020. However, these measures remain depressed as base rent remains below pre-pandemic levels; expense reimbursements have decreased; and several expenses, including insurance and utilities, have increased.

While cash flows remain below DBRS Morningstar’s expectations when the ratings were assigned in 2020, there are mitigating factors such as the 10% occupancy increase in early 2022 when several new tenants signed leases at the property, including Dave & Buster’s, which took the lone empty anchor space for the mall as a whole. According to the most recent financial reporting for the period ended March 31, 2022, the annualized base rent figure is $17.9 million, up approximately $1.0 million from YE2020, an increase that will grow once Dave & Buster’s rent is included. Additionally, tenant sales have rebounded steadily over the past year and as of the most recent reporting received by DBRS Morningstar, have slightly increased above pre-pandemic levels. Given these factors, DBRS Morningstar expects the property’s in-place cash flows to continue rising toward the pre-pandemic levels and will monitor the servicer’s reporting for developments.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental, social, and governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Class X is an interest-only (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 Morningstar.

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

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

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

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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 DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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