DBRS Confirms Ratings on MSCCG Trust 2015-ALDR, Stable Trends

DBRS Limited (DBRS) has today confirmed the Commercial Mortgage Pass-Through Certificates, Series 2015-ALDR (the Certificates), issued by MSCCG Trust 2015-ALDR (the Trust) as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)

All trends are Stable.

The rating confirmations reflect the continued stable performance of the transaction since closing in May 2015, with an original trust balance of $255.6 million, collateralized by the fee interest in the Alderwood Mall located in Lynwood, Washington. The underlying loan will amortize by approximately 22.0% during the ten-year term. As of the May 2016 remittance, scheduled amortization has resulted in a collateral reduction of 1.3%.

The whole mortgage loan in the amount of $355 million consists of seven separate notes (four pari passu senior notes and three pari passu subordinate notes) spread between three conduit CMBS transactions and the subject transaction. The conduit transactions are the MSM 2015-MS1, GSMS 2015-GC32 and CGCMT 2015-P1 transactions; of those three, DBRS rates the MSM 2015-MS1 transaction. The subject transaction holds the senior A-1-1 and A-1-2 pari passu notes, as well as the A-2-1 and A-2-2 notes, the subordinate pari passu notes.

Originally built in 1979, the property consists of an enclosed super-regional mall with two open-air sections, located in a northern suburb of Seattle. The collateral portion of the property consists of 575,704 square feet (sf) of major tenant, cinema and in-line space currently occupied by 153 national and regional tenants. The subject features five anchor tenants: Macy’s, JCPenney, Sears, Loews Cineplex and Nordstrom. Only the Loews Cineplex serves as collateral for the loan, though an affiliate of one of the sponsors, General Growth Properties (GGP), co-owns the Sears parcel with the tenant. The property is owned by a GGP/Homart II L.L.C., a joint venture between GGP and the New York State Common Retirement Fund, managed by an affiliate of GGP. The partnership purchased the mall in 1999 for $162.0 million and has spent an additional $162.0 million renovating and expanding the property prior to securitization over the past 16 years. As of the YE2015 reporting, the loan had a debt service coverage ratio (DSCR) of 1.70 times (x), compared to 1.58x at DBRS UW, representing a 7.6% increase to the NCF since issuance.

According to the December 2015 rent roll, the collateralized portion of the mall was 99.0% occupied with an average rental rate of $44.31 per square foot (psf), in line with rates at the time of securitization. Since December 2015, ten tenants, representing 2.7% of the collateral net rentable area (NRA), have rolled; however, all but two have either been confirmed renewals by the servicer or appear to have renewed based on the mall’s online directory. The three largest tenants that had lease expirations were Hollister (0.5% of NRA), Champs (0.4% of NRA) and Buckle (0.5% of NRA). The servicer indicated that all three tenants have renewed their leases, but no terms have been provided to date. House of Cutlery and Godiva Chocolate, representing less than 1.0% of the NRA combined have vacated their spaces. Through the next 12 months, 18 tenants, collectively representing 5.1% of the collateral NRA, have lease expirations. Together, the three largest tenants, Urban Outfitters, Pottery Barn and Williams-Sonoma, represent less than 2.0% of the NRA combined, and according to the servicer, all have expressed interest in renewing their leases. In response to the servicer’s request for a leasing update, the borrower indicated vacant space is being actively marketed, with the desirability of Alderwood Mall’s location and strong tenant base driving healthy demand for space at the property.

Overall mall sales have been strong and continue to experience positive growth year over year. According to the tenant sales report for the term ending in December 2015, total collateral sales have improved by 7.6% since last year, reporting a running 12-month sales per square foot (psf) of $547 psf compared to $510 psf the previous year. Although the property’s anchor tenant, Loews Cineplex reported a 9.5% decline in sales per screen, total inline tenant sales have experienced an 8.4% growth, heavily driven by Apple’s sales performance after the launch of the Apple iPhone 6 and 6 Plus. Apple’s running 12-month sales psf was reported at $14,682, which is representative of a 48.5% increase since last year. Excluding Apple’s sales figures, total collateral sales reports a more moderate improvement of 0.5% at $428 psf, compared to $425 psf in the previous year.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.

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