U.S. Retail Center Mortgage Secures $380.6 Million in CMBS

Notable issues with the DTP Commercial Mortgage Trust 2023-STE2 deal include the exposure of AMC tenants to the top three properties in the portfolio.

Photography by Ian Dewar/IanDewar –

Commercial mortgage pass-through certificates issued by DTP Commercial Mortgage Trust 2023-STE2 are secured by the borrower’s fee simple first lien mortgage loans at 10 retail centers.

The malls, which total 3.4 million square feet and are located in nine states, are primarily grocery or shadow stores, with premium discount retailers and mass merchandisers, according to Moody’s Investors Service. Deadline is December 28, 2023.

The loan originator and guarantor is Dividend Trust Portfolio, a joint venture of SITE Centers Corp. and Frontier JV Investor, itself a joint venture of China Merchants Group and China Life Insurance.

Loan sellers include Wells Fargo National Association, Goldman Sachs Mortgage Co. and Key Bank National Association. Wells Fargo is also the primary servicer on the loan, and Rialto is the special servicer.

The properties were developed or redeveloped at various times between 1978 and 2015. The sponsors acquired the properties between 1993 and 2012, then invested $29 million between 2018 and 2023. As of October 2023, 95.9% of the portfolio was leased to 189 different tenants, Moody’s said.

Moody’s expects asset value to be US$403.6 million (adjusted to US$454.3 million), a capitalization rate of 9.33% (adjusted to 8.29%), a loan-to-value (LTV) of 94.3% (adjusted to 83.8%), and repayment The debt coverage ratio is 94.3% (83.8% after adjustment). (DSCR) is 1.48%X (1.07X adjusted), and the debt yield is 9.9%.

Moody’s said the interest-only loan has a term of five years, assuming a fixed interest rate of approximately 6.7%, and is expected to mature on January 11, 2029.

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Credit enhancement is provided by the subordinated tranche.

Moody’s said AMC Theaters is the largest tenant in the portfolio, accounting for 10.4% of the portfolio’s base rents. The company was affected by headwinds in the theater industry.

Moody’s listed significant strengths of the deal, such as strong anchor tenancies, refined tenant roster, experienced sponsorship, geographic diversity and cross-collateralization. Notable issues with the transaction include: AMC tenant exposure to the top three properties in the portfolio; interest-only mortgage profile; rollover risk; secondary/tertiary market risk; and credit-negative legal features.

Moody’s has assigned provisional ratings to six categories of securities: Aaa is A; Aa3 is B; A3 is C; Baa3 is D; Ba1 is E; and Ba2 is HRR. R notes.

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