A loan on a component of Victoria Gardens, an outdoor super-regional shopping center in Rancho Cucamonga, Calif., will collateralize $265 million in commercial mortgage-backed securities (CMBS) from the BFLD 2024-VICT Mortgage Trust.
One of the transaction's many positive attributes is its low loan-to-value ratio, 71.5%, according to Moody's Ratings. So are the property's location and drivers of demand, the rating agency said. With 4.7 million residents, the Riverside-San Bernardino-Ontario, Calif., metro area ranks as the 12th most populous metro area in the U.S. This confers a growing and economically diverse demand base that comprises healthcare, transportation, retail trade and professional services.
Victoria Gardens is one of the dominant centers in its market, Moody's adds. Aside from the collateralized area, it contains 1.1 million square feet of rentable space. The property is 94.2% leased as of Feb. 28, 2024, the result of a 4.9% increase over the historical four-year occupancy average of 89.8%
Sales are strong, too. Small shops under 10,000 square feet—excluding Apple—averaged $796 per square feet as of January 2024, over a trailing twelve-month period, Moody's said. That is a 25.4% increase from the $635 in pre-pandemic inline sales reported in 2019, the rating agency said. Moody's also cites Brookfield Properties Retail Holding and Queensland Investment own the property, according to the rating agency.
But there are also credit challenges. For one, leases representing 77.2% of the property's net rentable area (NRA), and 74.3% of the property's rent are set to expire through yearend 2029, conferring rollover risk to the property. Yet this is mitigated, because the rollover is evenly spread across the loan term, with 2.3% of NRA expiring in 2024; 9.0% in 2025; 14.8% in 2026; 15.5% in 2027; 10.4% in 2028; and 17.3% in 2029.
Also, the loan provides for interest-only payments during the entire loan term, and the it is backed by just one asset.
BFLD 2024-VICT will issue notes through six tranches of class A, B, c, HRR, R and ELP notes, Moody's said. It assigned Aaa, Aa3 and A2 to classes A, B, C and HRR, respectively.
