Deutsche Bank and JPMorgan Chase have found a home for the another portion of a $558 million mortgage on a San Francisco shopping mall that serves as collateral for a single-asset CMBS launched this week.
DBJPM 2016-C3 is backed by 32 commercial mortgages secured by 54 properties, according to Kroll Bond Rating Agency. The largest loan, at $84 million, is secured by the Westfield San Francisco, a nine-story, 1.4 million square foot retail and office property located along Market Street in the Union Square neighborhood. Another $306.9 million slice of the same mortgage serves as the sole collateral for a separate transaction, DBJPM 2016-SFC.
Among the credit strengths of the conduit transaction, according to the rating agencies, is the fact that it has less leverage than recent deals. The pool’s weighted average (WA) debt service coverage ratio, as measured by Fitch, is 1.19x. That’s better than both the year-to-date average of 1.16x and the 2015 average of 1.18x.
Also, two of the six largest loans in the pool have investment-grade credit opinions. One of them is the Westfield San Francisco Centre (9.4% of the pool), which has an investment-grade credit opinion of 'A' from Fitch and AA- from KBRA, on a stand-alone basis.
Fitch is less enthused about the fact that the pool is more concentrated than other recent Fitch-rated multi-borrower transactions. The top 10 loans comprise 64% of the pool, which is greater the year-to-date average of 54.8% and the 2015 average of 49.3%.
The deal is also heavily exposed to hotels, which are considered to be among the riskiest type of commercial property because nightly room rates vary so much. Hotels represent 20.8% of the pool, including six of the 20 largest loans. That’s above the average of 16.1% for the deals that Fitch has rated this year.
The loans will also amortize very little over the term of the deal, increasing the risk that they will be difficult to refinance at maturity. Based on the scheduled balance at maturity, the pool will pay down 9.4% of the initial pool balance. This is lower than the YTD 2016 average of 9.9% and the 2015 average of 11.7%, according to Fitch.
DBJPM 2016-C3 will issue $893.7 million of notes; both KBRA and Fitch have assigned provisional triple-A ratings to the super senior tranches, which benefits from credit enhancement, as well as to the senior tranche (also known as the “junior A” tranche), which benefits from 21.625% credit enhancement.