Fitch Upgrades QCMT 2013-QC

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded four and affirmed two classes of Queens Center Mortgage Trust, commercial mortgage pass-through certificates, series 2013-QC. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The upgrades are due to the property's steady improvement in performance, which has exceeded Fitch's expectations from issuance. The year-end (YE) 2015 servicer-reported net cash flow (NCF) has improved 19% compared to issuance. Occupancy and in-line comparable stores sales also remained strong at 95% and $1,120 per square foot (psf), respectively.

The property is a four-story regional shopping mall located in Elmhurst, NY, in the heart of Queens. The property was originally built in 1974 and last renovated in 2004. The current square footage is approximately 967,901, of which 411,177 sf is collateral for the loan. The two anchors, Macys and JC Penney, each own their own stores and are not part of the loan collateral. The remaining tenants include Forever 21, H&M, Modell's Sporting Goods, Banana Republic, Express, Gap, Urban Outfitters, Victoria's Secret, and Apple.

Improved Performance/Strong Sales: The mall continues to exhibit improved performance, stable occupancy, and strong sales since issuance with the addition of several new tenants including Apple and most recently The Cheesecake Factory. The year-end (YE) 2015 net cash flow (NCF) is up 19% since issuance. The mall's occupancy remains stable at 95% as of June 2016. The mall features a diverse tenant mix which generated total sales of approximately $572 million and exceptional in-line sales of $1,120 per square foot (psf) for the trailing 12-month (TTM) period ended June 30, 2016 up from $1,097 psf TTM ended May 31, 2015, this places the property as one of the top performing malls in the country.

Location/Dominant Market Position: Queens is New York City's second most populated borough, with no available land for a comparable retail development in the subject's immediate area. The property's primary trade area includes approximately 2.2 million people in a five-mile radius. The mall is unique among other malls with sales in the subject's range due to enormous customer traffic, estimated at 18.0 million visitors per year, and a lower average cost per purchase basis given the lack of luxury retailers prevalent at many of the country's top performing malls.

Granular Rent Roll: Of the approximate 150 tenants at the property, only one tenant (H&M - 4.8%) contributes more than 2.6% of base rent.

Positive Leasing Momentum and Tenant Retention: Since early 2011, over 80,000 sf of space has either been newly leased, renewed, or expanded, representing approximately $9.1 million in annual base rent. Historically, tenant retention is approximately 80%, with actual levels in 2010 at 84.9% and 100% in 2011 and 2012, among the limited sample for those years.

Occupancy Costs: The average occupancy cost for in-line tenants is 22% as of TTM June 2016, exceeding national averages. The property is able to sustain higher occupancy costs given the high levels of aggregate sales.

RATING SENSITIVITIES

The Outlook for classes A, X-A, X-B, B, C, and D are expected to remain Stable due to continued strong property performance. If performance remains strong and sales outperform expectations, future upgrades are possible. Fitch does not foresee near-term downgrades unless there is a material decline in property performance.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has upgraded and revised the Rating Outlooks on the following ratings:

--$77.2 million class B to 'AAsf' from 'AA-sf'; Outlook to Stable from Positive;

--Interest-only class X-B to 'AAsf' from 'AA-sf'; Outlook to Stable from Positive;

--$52.8 million class C to 'Asf' from 'A-sf'; Outlook to Stable from Positive;

--$69.8 million class D to 'BBBsf' from 'BBB-sf'; Outlook to Stable from Positive.

Fitch has also affirmed the following ratings:

--$400.2 million class A at 'AAAsf'; Outlook Stable;

--Interest-only class X-A at 'AAAsf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)

https://www.fitchratings.com/site/re/885802

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Related Research

Queens Center Mortgage Trust 2013-QC, Series 2013-QC -- Appendix

https://www.fitchratings.com/site/re/701651

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014649

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014649

Endorsement Policy

https://www.fitchratings.com/regulatory

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Fitch Ratings
Primary Analyst
Lisa Cook, +1-212-908-0665
Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
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Senior Director
or
Media Relations, New York
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[email protected]

Source: Fitch Ratings

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