NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded one and affirmed five classes of Vornado DP LLC Trust 2010, series 2010-VNO commercial mortgage pass-through certificates. A full list of rating actions follows at the end of this ratings action commentary.
KEY RATING DRIVERS
The upgrade reflects the stable performance of the underlying collateral properties and the collateral amortization since issuance. Occupancy has remained relatively stable with only a slight decline from 96% at March 2014 to 95% at April 2015. The portfolio's year-end (YE) 2014 net cash flow (NCF) was in-line with YE 2013, only decreasing 0.1%. Additionally, 9% of the pool paid down since issuance as a result of scheduled amortization.
The pool consists of a single non-recourse mortgage loan secured by cross-collateralized and cross-defaulted first-lien mortgages or deeds of trust on fee interests in 40 retail properties. The fixed-rate component loan amortizes on a 30-year schedule. The loan is sponsored by Vornado Realty L.P. (rated 'BBB', Stable Outlook by Fitch), an affiliate of the depositor and the borrowers.
The 40 collateral properties are scattered throughout the Northeast, with considerable concentrations in New Jersey (25 properties, 72% of the allocated loan amount) and Pennsylvania (seven, 13%). The tenant base is diverse and consists primarily of national and large regional tenants, including Wal-Mart (14% of the net rentable area [NRA], rated 'AA', Stable Outlook), Lowe's (11%), and Home Depot (10%; rated 'A', Stable Outlook). Most of the leases are long-term in nature.
As part of its review, Fitch analyzed occupancies at the properties based on rent rolls dated April 2015. Across the portfolio, occupancy remained strong at 95.0%, compared with 97.0% at issuance. As of YE 2014, the Fitch adjusted debt service coverage ratio (DSCR) for the loan was 1.59x, compared with 1.41x at issuance. The DSCR was calculated based on a Fitch adjusted NCF (reflective of an additional vacancy factor, a stabilized management fee, and deductions for stabilized capital expenditures and leasing costs) and a stressed debt service amount calculated using a 9.25% refinance constant.
As of the May 2015 distribution date, the pool's aggregate certificate balance has paid down approximately 9% to $601.6 million from $660 million at issuance. The loan is scheduled to mature in September 2020.
The Rating Outlooks remain Stable, which reflects the stable collateral performance. Fitch does not expect any further positive rating actions unless there are any material changes to the underlying property occupancy, cash flow, or significant paydown from amortization. Future downgrades are possible should there be a material decline in portfolio cash flow or occupancy.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following rating:
--$60 million class D to 'BBBsf' from 'BBB-sf'; Outlook Stable.
Fitch has affirmed the following ratings:
--$81.6 million class A-1 at 'AAAsf'; Outlook Stable;
--$304.3 million class A-2-FX at 'AAAsf'; Outlook Stable;
--$60 million class A-2-FL at 'AAAsf'; Outlook Stable;
--$38.7 million class B at 'AAsf'; Outlook Stable;
--$57 million class C at 'Asf'; Outlook Stable.
Additional information is available at www.fitchratings.com.
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 20 Mar 2015)
Global Structured Finance Rating Criteria (pub. 31 Mar 2015)
Dodd-Frank Rating Information Disclosure Form