CMBS Backed by $500M Brooklyn Mall Loan in the Works

Seven classes of a single-asset commercial mortgage-backed securities deal collateralized by a $500 million first mortgage financing on the acquisition of Kings Plaza mall in Brooklyn, N.Y., have received preliminary ratings from Morningstar.

Ratings range from Morningstar’s top AAA investment grade rating to a speculative grade BB-.

According to the presale report for the deal, GS Mortgage Securities Trust Corp. 2013-KING, the loan securing the transaction has an 84-month term and amortizes on a 360-month schedule at an interest rate of roughly 3.44%. Wells Fargo is serving as the servicer and special servicer. Deutsche Bank is the trustee.

The cutoff balance for the loan was $498.5 million at securitization, reflecting 94.5% leverage based on Morningstar’s valuation. The presale report shows that based on the appraised value the leverage is 65.6%.

The sponsor, The Macerich Partnership LP, contributed $268.4 million to the transaction. The publicly traded Macerich Co., which owns and operations malls across the country, owns a majority interest in the sponsor and may be able to achieve leasing synergies with some other assets in the area, according to the report. Major anchor tenants at the mall include Macy’s, Sears and Lowe’s.

The mall’s effective gross income has increased by an average of 3.25% between 2009 and the trailing 12 months ending in July of last year. Its net operating income increased by an average of 2.06% during this period. Arranger information shows its sales have historically outperformed its national and regional peer groups.

Based on information on the arranger’s website as of Feb. 4, Morningstar found the loan yielded a cash flow of $39.94 million, 4.8% lower than the most recent reported cash flow and 5.1% lower than the issuer’s underwritten net cash flow. Morningstar calculated a 1.38x debt service coverage ratio based on loan payment terms.

Possible risks in the deal include some a partial real estate tax parcel on the property and the fact that one of the leaseholders who had been in 22,175 of space on the mall’s second level has vacated.