Morgan Stanley and Citigroup plan to securitize a $243.3 million loan secured by Alderwood Mall, a super regional single-level mall located in Lynnwood, Wash.
Standard & Poor’s will rate the transaction, called MSCCG Trust 2015-ALDR. The rating agency assigned a preliminary rating of AAA’ to $13.8 million of class A notes; AA- to $47.8 million of class B notes; A- to $35.9 million of class C notes; and BBB- to $44 million of class D notes
Troubled retailers Sears and J.C. Penny anchor the property, which is jointly owned by General Growth Properties and New York State Common Retirement Fund.
Although the stores are not part of the collateral pool, if they close because of corporate-level stress it could negatively affect the mall, potentially triggering lease terminations or rent relief from co-tenancy clauses, according to S&P.
This risk is offset by the higher-than-average sales at both shops, which make the space more leasable. S&P said that Sears' total store sales of $18.8 million are higher than the $12.8 million chain-wide average, and J.C. Penney's sales of $201 per square foot are more than double the chain-wide average of $97 per square foot.
“Based on the mall's strong competitive position and in-line retailer composition and performance, we believe that this anchor space could likely be re-leased if it was vacated,” stated S&P in the presale report.
The pool is moderately leveraged with a 74.2% loan-to-value ratio, as calculated by S&P, a 51.2% LTV ratio based on the appraised value. Occupancy rate at the mall, excluding anchors, was approximately 96.4% as of February 2015. The average collateral occupancy since 2011, excluding anchors, was 97.5%.