DBRS Morningstar Confirms All Ratings of BAMLL Commercial Mortgage Securities Trust 2013-WBRK

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2013-WBRK issued by BAMLL Commercial Mortgage Securities Trust 2013-WBRK as follows:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)

With this review, DBRS Morningstar changed all trends to Stable from Negative. The Negative trends placed on all classes with last year’s review were generally reflective of DBRS Morningstar’s concerns for retail properties, and specifically, regional mall properties, amid the Coronavirus Disease (COVID-19) pandemic. In the last year, however, the subject transaction has generally performed as expected, with the loan remaining current and no relief requested by the sponsor in connection with the pandemic. In addition, the collateral mall is well located with a desirable tenant mix and, as such, is generally well positioned to capture increasing shopper demand. This is supported by the 2021 sales reporting, which suggests traffic is rebounding and sales are generally healthy.

The loan is secured by the fee and leasehold interest in approximately 490,000 square feet (sf) of a 1.5 million-sf super-regional mall, Willowbrook Mall. The mall is in an affluent area in Wayne, New Jersey, about 20 miles northwest of Manhattan. The subject is a fixed-rate loan that was structured with a 12-year term and is scheduled to mature in March 2025. The loan facilitated the repayment of $137.0 million in existing debt and provided a partial return of cash equity of $210.0 million to the sponsor. The loan sponsor and operator is Brookfield Property Partners L.P (Brookfield, rated BBB (low) with a Stable trend by DBRS Morningstar), which acquired the subject property with its acquisition of General Growth Partners in 2018.

At issuance, the mall’s noncollateral anchors included Bloomingdale’s, Macy’s, Sears, and Lord & Taylor, the last two of which have since closed. The former Sears box is partially leased to Dave & Buster’s and Yard House, with the latter opening for business in June 2021. A news article published in September 2020 by NorthJersey.com noted that more than 100 employees of Dave & Buster’s at Willowbrook Mall would be laid off in November 2020 as a result of the affects of the pandemic; however, since that time, Dave & Buster’s has re-opened its doors at the subject and other locations across the country.

The sponsor also signed a lease with BJ’s Wholesale Club for another portion of the Sears space and that tenant’s store is expected to open in the fall of 2021. According to a news article from NorthJersey.com in June 2021, Shopper’s Find will temporarily occupy the former Lord & Taylor space, which became dark in 2020. Hilco Global and Gordon Brothers own Shopper’s Find, which they recently founded as an off-price department store retailer operating in temporary locations to sell merchandise acquired via surplus and clearance sales with suppliers and manufacturers. The new retailer has taken up temporary space in several former Lord & Taylor spaces across the country. Although the replacement of Lord & Taylor with a temporary tenant is obviously not as beneficial as securing replacements in permanent retailers, entertainment venues, or restaurants, as was done with the former Sears space, DBRS Morningstar believes the subject property should be generally well positioned to attract interest from those types of tenants once the coronavirus pandemic has stabilized.

According to the June 2021 rent roll, the collateral portion of the mall was 94.9% occupied, which is slightly below the March 2020 occupancy rate of 99.1%.The largest collateral tenants include Zara (5.1% of the net rentable area (NRA), lease expires in July 2027), H&M (4.9% of the NRA, lease expires in January 2029), and Old Navy (4.0% of the NRA, lease expires in July 2027). There is minimal near-term rollover risk as tenants representing just 8.8% of the NRA have leases expiring in the next six months. According to the trailing 12 months (T-12) ended June 2021 tenant sales report, in-line tenants occupying less than 10,000 sf (excluding Apple) averaged sales of $596 per square foot (psf), which is higher than the year-end (YE) 2020 sales figure of $402 psf but still below the pre-pandemic sales of $658 psf at YE2019. Tenants occupying more than 10,000 sf reported T-12 ended June 2021 sales of $339 psf, an improvement over the YE2020 sales of $235 psf but below the YE2019 sales of $458 psf. The dip in sales for 2020 was expected because of the property’s pandemic-related closure from March 2020 to June 2020, but the improvement illustrated in the T-12 June 2021 sales figures are positive signs of recovery.

According to the T-6 ended June 2021 financials, the loan reported a debt service coverage ratio (DSCR) of 2.29 times (x), compared with the YE2020 DSCR of 2.79x, YE2019 DSCR of 3.19x, and the DBRS Morningstar DSCR at issuance of 2.40x. The decline in the T-6 ended June 2021 net cash flow from YE2020 was mainly due to a drop in base rental revenue, which is likely tied to rent concessions that may have been provided for tenants amid the pandemic. The relatively healthy in-place DSCR, as well as the increasing trend in sales, strong occupancy rate, and sponsor’s ability to back-fill some of the dark anchor spaces during a pandemic, all support the rating confirmations and Stable trends placed with this review.

ESG CONSIDERATIONS
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/373262.

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

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.
For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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