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

DBRS Limited (Morningstar DBRS) confirmed the credit ratings on the following classes of 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 underlying collateral as exhibited by the year-over-year growth in net cash flow (NCF), strong in-line sales, and healthy occupancy rate.

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 $4.0 billion as of November 2024 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 October 2024 remittance, the transaction exhibited a collateral reduction of 26.5% since issuance with an outstanding trust balance of $221.3 million.

According to the June 2024 rent roll, the entire mall and collateral space were 99.2% and 98.6% occupied, respectively, compared with the June 2023 figures of 97.1% and 95.2%. 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) as well as noncollateral tenants Macy's Women's & Children's and Furniture City. While Morningstar DBRS notes that 45.0% of the collateral NRA tenants have leases expiring within 12 months of the June 2024 rent roll, the property benefits from a history of strong occupancy, demonstrating the property's ability to retain tenancy. In addition, Morningstar DBRS notes that this upcoming rollover is relatively granular with all tenants, with one exception, comprising less than 2% of the NRA. JCPenney comprises 15% of the NRA; Morningstar DBRS has a question out regarding whether this tenant intends to vacate or renew upon lease expiration, but a response has not been received as of the date of this press release. Given JCPenney's tenure at the property and this location's sales historically outperforming its national average, Morningstar DBRS expects there is a high likelihood that the tenant will exercise the next of its eight remaining five-year renewal options. According to the tenant sales reports for the trailing 12-months (T-12) ended June 30, 2024, tenants occupying less than 10,000 sf of space (excluding Apple) reported robust in-line sales of $696 per square foot (psf), in line with the figures of $708 psf for the T-12 ended September 30, 2023, suggesting the property will likely continue to be a strong performer.

The property reported an annualized June 2024 NCF of $25.5 million (reflecting a debt service coverage ratio of 1.73 times (x)), up from the YE2023 and YE2022 NCF by 3.5% and 9.5%, respectively. For this review, the loan analysis was based on an updated Morningstar DBRS value of $329.3 million, which was derived from a haircut to the annualized June 2024 NCF and a capitalization rate of 7.75%. The updated Morningstar DBRS value implies a loan-to-value ratio of 67.2%. 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.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-factors-in-credit-ratings).

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

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798).

Other methodologies referenced in this transaction are listed at the end of this press release.

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@morningstar.com.

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.

Morningstar DBRS 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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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (September 19, 2024), https://dbrs.morningstar.com/research/439699
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (October 28, 2024), https://dbrs.morningstar.com/research/441840
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294

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

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.