Morningstar DBRS Confirms All Credit Ratings on MSC 2011-C3 Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2011-C3 issued by MSC 2011-C3 Mortgage Trust as follows:

-- Class E at BBB (sf)
-- Class F at BB (high) (sf)
-- Class X-B at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The credit rating confirmations reflect Morningstar DBRS' stable performance outlook for the remaining loans in the pool, including the recoverability expectation for the largest remaining loan in the transaction, Westfield Belden Village (Prospectus ID#2, 92.3% of the pool). The loan is secured by a portion of a regional mall in Canton, Ohio, and was most recently reappraised in 2021 at a value of $81.6 million, representing a 48.7% decline from its issuance appraised value of $159.0 million in 2011. Morningstar DBRS analyzed the recoverability prospects for the loan by applying a stressed capitalization rate (cap rate) to the YE2023 net cash flow (NCF). While the results of the recoverability scenario suggest a loss to the trust is likely, Morningstar DBRS expects it to be contained to the unrated Class H certificate, which totals $42.1 million as of the November 2024 remittance, supporting the credit rating confirmations with this review.

Westfield Belden Village is anchored by a collateral Macy's (29.3% of the collateral net rentable area (NRA), lease expiring in February 2026) and a noncollateral Dillard's. The mall's former Sears box has been leased to Dave & Buster's and Dick's Sporting Goods, neither of which are collateral for the subject loan. The loan was modified in 2021, resulting in a five-year maturity extension to July 2026. According to the September 2024 rent roll, the collateral occupancy rate was 95.2%, with tenants representing 16.1% of NRA scheduled to roll throughout 2025. According to the financials for the trailing six months ended June 30, 2024, property operations yielded a debt service coverage ratio (DSCR) of 1.26 times (x), a decline from the YE2023 DSCR of 1.44x. As a result of the decline in DSCR, the loan was added to the servicer's watchlist and is currently in a cash sweep period, with approximately $591,000 trapped as of November 2024.

In its analysis for this review, to test the durability of the credit ratings, Morningstar DBRS derived an updated property value of $58.1 million (loan-to-value ratio of 152.1%) by applying a stressed cap rate of 16.0% to the YE2023 NCF. Morningstar DBRS expects that in a default scenario, losses associated with this loan would be contained to the unrated Class H, with implied proceeds sufficient to repay all remaining rated classes.

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) at https://dbrs.morningstar.com/research/437781.

Class X-B 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 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.

Morningstar DBRS notes that a traditional model-based sensitivity was not performed, however, Morningstar DBRS notes that the credit ratings are sensitive to the recoverability assumptions on the three remaining loans that are detailed in the accompanying press release. Should recoverability of the remaining loans be lower than that implied by the stressed values in the latest analysis, credit ratings lower in the capital stack would be those most negatively impacted.

DBRS Limited
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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 CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model version 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

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.