Fitch Affirms COMM 2013-GAM
KEY RATING DRIVERS
The trust certificates represent the beneficial interests in a mortgage loan secured by the Green Acres Mall property located in Valley Stream, NY. The eight-year fixed-rate (3.43%) amortizing loan matures in February 2021.
The affirmations are the result of sufficient credit enhancement and overall stable performance since issuance. The servicer-reported year-end 2015 (YE2015) debt service coverage ratio (DSCR) was 1.83x, compared to 1.91x YE2014 and 1.76x at issuance. Per the first-quarter 2016 (1Q16) rent roll, the property was 97.7% occupied, compared to 97.6% at YE2015, 98.1% at YE2014 and 96% at issuance. The property has been under renovation / redevelopment since May 2014 as outlined by the loan sponsor, Macerich, at issuance, to improve the appeal of the property and to attract more national retailers. Century 21 Department Store (4% net rentable area) has signed a 10-year lease and opened in October 2015. More new stores are expected to open at the premises. Fluctuation in occupancy and cash flow are expected during the process as the sponsor is working to re-tenant the spaces.
The Green Acres Mall is a 1,811,441 square foot (sf) enclosed two-level regional mall located on Sunrise Highway in Valley Stream, NY. The anchor tenants include BJ's Wholesale Club, JC Penney, Kohl's, Macy's, Macy's Men's/Furniture, Sears, Wal-Mart (subject to ground lease), as well as the recent opened Century 21 Department Store, all of which are part of the collateral. Major in-line tenants include Michael's, Modell's Sporting Goods, Old Navy, H&M, Express, and Victoria's Secret.
The subject property is located in one of the most densely populated areas of Nassau County, providing a strong shopper base for the mall. Although there are three other malls located within an approximate 15-mile radius, the property's in-line sales continue to remain strong despite the potential competition. Comparable in-line sales were $640 per square foot (psf ) as of trailing 12 months (TTM) March 2016, compared with $650 psf at YE2015, $580 psf at YE2014, $545 psf at YE2013 and $501 psf at issuance. Per the 2Q16 Reis report, the Long Island retail market had a vacancy rate of 6.2% with average asking rents of $27.96 psf. The mall average in-place rent is above market at $57.07 psf as of TTM March 2016.
As of the August 2016 remittance report, the transaction has paid down 6.8% to $302.5 million, from $324.4 million at issuance. As part of its review, Fitch analyzed the performance of the loan and its underlying collateral. Fitch modeled cash flow based on YE2015 financials, as well as the March 2016 rent roll. As part of its analysis, Fitch looked at certain scenarios which stressed the cash flow by excluding revenue from several tenants with lease rollover in 2016.
The Fitch stressed DSCR for the loan is 1.23x, compared with 1.11x at issuance. The Fitch stressed loan-to-value ratio is 71.8%, which is based on capitalization of the Fitch-adjusted net cash flow at a rate of 7.5%, compared to 79.7% at issuance. The improvement in performance indicators reflects slightly improved cash flow, as well as amortization since issuance.
The Stable Outlooks for all rated classes indicates no near-term rating actions are expected unless there are material changes in property performance, including any significant changes to cash flow. Based on property performance over the past several years, cash flow has improved since issuance. However, given the fluctuation in historical cash flow on a year-to-year basis, a more consistent cash flow trend showing sustainable improvement is needed before upgrades to classes rated 'AA' and below would be considered.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following classes:
--$33.2 million A-1 at 'AAAsf'; Outlook Stable;
--$154.9 million class A-2 at 'AAAsf'; Outlook Stable;
--IO class X-A at 'AAAsf'; Outlook Stable;
--$26 million class B at 'AA-sf'; Outlook Stable;
--$17 million class C at 'Asf'; Outlook Stable;
--$24.8 million class D at 'BBBsf'; Outlook Stable;
--$19 million class E at 'BBB-sf'; Outlook Stable;
--$27.6 million class F at 'BB-sf'; Outlook Stable.