Fitch Ratings has affirmed Vornado DP LLC Trust 2010, series 2010-VNO commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.
The affirmations are as a result of stable performance at the collateral properties since issuance. A slight decline in occupancy across the portfolio were offset by a 2.2% increase in the Fitch adjusted net cash flow (NCF) since last review and 3.3% paydown to the pool resulting from scheduled amortization. The Stable Outlooks reflect the likely direction of any changes to the ratings over the next one to two years.
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' by Fitch with a Stable Outlook), 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' with a 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 March 2012. Across the portfolio occupancy remained strong at 96.2%, compared with 97.4% occupancy at issuance. The most notable vacancy since last review occurred in Woodbridge, where the discount clothing retailer Syms (16% of the property's NRA) vacated prior to its 2015 lease expiration. Other major tenants with leases expiring (or approaching expiration) extended their respective terms. Lease expirations are generally well spread over the term of the loan.
As of year-end (YE) 2011, the Fitch adjusted debt service coverage ratio (DSCR) for the loan was 1.53 times (x), 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, a 3% add-on for operating expenses, 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 July 2012 distribution date, the pool's aggregate certificate balance has paid down approximately 3.3% to $638.3 million from $660 million at issuance. The loan is scheduled to mature in September 2020.
Fitch has affirmed the following classes:
--$118.3 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;
--$60 million class D at 'BBB-sf'; Outlook Stable.
Additional information on Fitch's criteria for analyzing U.S. CMBS large loans is available in the Sep. 26, 2011 report 'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 26, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651703
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