Goldman Sachs plans to issue a $500 million single-borrower CMBS backed by Kings Plaza Mall in Brooklyn.
The deal, GS Mortgage Securities Corporation Trust 2013-KING, will be rated by Standard & Poor’s. The class A notes are rated ‘AAA’; the class X-A notes are rated ‘AAA’; the class X-B notes are rated ‘A-‘; the class B notes are rated ‘AA-‘; the class C notes are rated ‘A-‘; the class D notes are rated ‘BBB’ and the class E notes are rated ‘BB-‘.
The notes are secured by the fee and leasehold interest in Kings Plaza, a 1.2 million-sq.-ft. regional mall located in Brooklyn, N.Y., of which 872,741 sq. ft. serves as collateral for the loan, according to the S&P presale report.
Under the mortgage loan agreement, Brooklyn Kings Plaza LLC and Kings Plaza Ground Lease LLC are the mortgage loan borrowers. The borrowers are controlled by Macerich, a publically traded REIT based in Santa Monica.
Kings Plaza competes primarily with four other retail properties but the property benefits from its proximity to the Belt Parkway, the primary east/west highway through Brooklyn, according to the presale report. Major tenants include Old Navy, Forever 21, H&M, Modell's, Victoria's Secret, and New York & Co. The properties generate approximately 16.8% of the mall’s base rental income.
The center also has approximately 85 in-line retail tenants, outparcels, kiosks, and temporary tenants that generate the remaining 44.4% of the Standard & Poor's-calculated base rental income.
Sears is the largest collateral tenant at the property. According to S&P, Sears reported sales of $120 per sq. ft. for 2011, which is below the chain's national average sales of $156 per sq. ft. The ratings agency said that Macerich sees development opportunities to reutilize the Sears space as additional inline, major, and restaurant space, if it opts to cancel the Sears lease.
“Should the Sears lease be materially amended to shorten the term of the lease or reduce the rent payable, or if the lease is terminated by mutual agreement before its expiration (excluding default by Sears), the sponsor will enter into a master lease for the Sears space,” explained S&P. “The master lease would provide for 110% of the rents paid by Sears and any tenant that chooses to terminate their lease due to a co-tenancy clause tied to Sears.”