DBRS Morningstar Confirms Credit Ratings on All Classes of BBCMS Trust 2015-VFM

DBRS Limited (DBRS Morningstar) confirmed the credit 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)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the asset as exhibited by the healthy occupancy rate, strong in-line sales, and net cash flow (NCF) growth since the onset of the Coronavirus Disease (COVID-19) pandemic.

The 11-year, fixed-rate loan is secured by the fee and leasehold interest in a 692,700 square foot (sf) portion of Vintage Faire Mall, a 1.1 million-sf super-regional mall in Modesto, California. The subject is the only super-regional mall within a 50-mile radius and is the largest enclosed shopping mall between Fresno and Sacramento, California. The loan sponsor is Macerich, a publicly traded real estate investment trust with a market capitalization of more than $2.2 billion as of November 2023 and one of the largest mall owners and operators in the United States. The loan amortizes over a 30-year schedule and, as of the November 2023 remittance, the transaction exhibited a collateral reduction of 18.6% since issuance with an outstanding trust balance of $227.9 million.

According to the June 2023 rent roll, the entire mall and collateral space were 97.1% and 95.2% occupied, respectively, compared with the June 2022 figures of 95.6% and 92.7%. Total mall occupancy has increased significantly since YE2021 from 83.2%, in line with the issuance figure of 98.0%. The mall is anchored by collateral tenants JCPenney (14.3% of total net rentable area (NRA), lease expiring in June 2025) and Macy’s Men’s & Home (7.8%, lease expiring in December 2026). In addition, the property is anchored by noncollateral Macy’s Women’s & Children’s, Furniture City, Dick’s Sporting Goods, and Dave & Buster’s. Over the next 12 months, tenants representing less than 10.5% of the collateral NRA have leases that expired or will be expiring. According to the tenant sales reports for the trailing 12 months (T-12) ended June 30, 2023, tenants occupying less than 10,000 sf of space (excluding Apple) reported in-line sales of $706 per square foot (psf), an increase compared with the figures of $643 psf for the T 12 ended September 30, 2022; $468 psf for the T-12 ended June 30, 2021; and $626 psf for YE2019.

According to the financials for the trailing six months ended June 30, 2023, the subject reported an annualized NCF of $24.2 million (reflecting a debt service coverage ratio (DSCR) of 1.61 times (x)), an improvement over the YE2022 NCF of $23.8 million (DSCR of 1.58x) and YE2020 NCF of $22.2 million (DSCR of 1.47x) when performance reached a trough because of challenges arising from the pandemic. Although the most recent NCF is still below pre-pandemic levels, considering the YE2019 NCF figure was $26.4 million, the subject has made strides in terms of stabilization. In addition, the strong occupancy rate and tenant sales suggest NCF will likely continue to trend positively.

For this review, the loan analysis was based on an updated DBRS Morningstar value of $300.8 million, which was derived from a haircut to the YE2022 NCF and a capitalization rate of 7.75%, compared with the DBRS Morningstar stress value derived in 2020 of $287.4 million, where an additional 15.0% haircut had been applied to the most recent year-end NCF available at the time to account for concerns surrounding the pandemic. The updated DBRS Morningstar value implies a loan-to-value ratio (LTV) of 75.8%, compared with an LTV of 79.3% based on the DBRS Morningstar 2020 stressed value. Positive qualitative adjustments totaling 0.5% were maintained to reflect generally low cash flow volatility and strong market fundamentals, considering the lack of local competition.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/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/416784 (July 4, 2023).

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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

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 credit rating was initiated at the request of the rated entity.

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

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
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The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American Single-Asset/Single-Borrower Ratings Methodology (October 19, 2023; https://www.dbrsmorningstar.com/research/422174)

Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://www.dbrsmorningstar.com/research/420982)

North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/417279.

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