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MACY'S, INC.

(M)
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Delayed Nyse  -  01:00 2022-11-25 pm EST
23.65 USD   +0.98%
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Fitch Affirms CFCRE 2016-C6; Revises One Outlook to Stable

09/29/2022 | 06:57am EST

Fitch Ratings has affirmed 13 classes of CFCRE 2016-C6 Mortgage Trust.

Fitch has also revised the Rating Outlook on class D to Stable from Negative. The Rating Outlooks on classes E and X-E remain Negative.

RATING ACTIONS

Entity / Debt

Rating

Prior

CFCRE 2016-C6

A-2 12532AAY5

LT

AAAsf

Affirmed

AAAsf

A-3 12532AAZ2

LT

AAAsf

Affirmed

AAAsf

A-M 12532ABA6

LT

AAAsf

Affirmed

AAAsf

A-SB 12532AAX7

LT

AAAsf

Affirmed

AAAsf

B 12532ABB4

LT

AA-sf

Affirmed

AA-sf

C 12532ABC2

LT

A-sf

Affirmed

A-sf

D 12532AAA7

LT

BBB-sf

Affirmed

BBB-sf

E 12532AAC3

LT

B-sf

Affirmed

B-sf

F 12532AAE9

LT

CCCsf

Affirmed

CCCsf

Page

of 2

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Improved Loss Expectations: The Outlook revision to Stable from Negative on class D reflects performance stabilization of properties that were affected by the pandemic, including the return of two previously specially serviced loans to the master servicer (Inn at the Colonnade and Holiday Inn Express Nashville - Downtown; combined 5.7%). Fitch's ratings incorporate a base case loss of 4.7%. The Outlooks on classes E and X-E remain Negative to reflect concerns with loans remaining in special servicing and the continued underperformance of 7th & Pine Seattle Retail & Parking (8.2%).

Seven loans (17.5%) have been flagged as Fitch Loans of Concern (FLOCs); including specially serviced loans (6.8%). Three loans (15.1%) have been flagged for high vacancy, low NOI debt service coverage ratio (DSCR) and/or pandemic-related underperformance.

The largest FLOC and largest contributor to expected losses is 7th & Pine Seattle Retail & Parking (8.2%), retail/parking garage located within the downtown Seattle CBD. Subject YE 2021 NOI DSCR has fallen to 0.58x compared to NOI DSCR of 1.71x. The decline in performance is largely due to the decline in rent from relief granted in response to the coronavirus pandemic. In particular, the subject's largest tenant, Standard Parking (NRA 93%), has been paying abated rent since 2020. At issuance, Standard Parking accounted for approximately 74% of underwritten rents.

This loan had previously transferred to special servicing in May 2020 for pandemic related underperformance, but returned to master servicing in July 2020 after property performance improved. The loan is currently cash managed with excess funds being swept into the excess cash flow reserve. According to the master servicer, the guarantor failed the liquidity covenant on the December 2020 balance sheet, and counsel has sent a ROR letter to the borrower. Fitch's expected loss of 15.2% reflects a 9.5% cap rate on YE 2019 NOI.

The second largest contributor to expected losses is the Fresno Fashion Fair Mall (5.5%), which is secured by the 561,989 sf portion of an 835,416 sf regional mall located in Fresno, CA. Non-collateral tenants include Macy's (Women's & Home, and Men's & Children's Stores), BJ's Restaurant and Brewhouse, Chick-fil-A and Fleming's. The largest collateral tenants include JCPenney (27.4% of NRA, lease expiry in November 2022), H&M (3.4%, January 2027), Victoria's Secret (2.6%, January 2027), Cheesecake Factory (1.8%, January 2026) and ULTA Beauty (1.8%, August 2027).

The mall is demonstrating a strong recovery from the effects of the pandemic. As of YE 2021, occupancy improved to 93% compared to 85% at YE 2020 and 92.5% at YE 2019. In addition, sales are approaching pre-pandemic levels. As of the TTM ended June 2022, comparable inline sales for tenants under 10,000 sf were $973 psf (including Apple) and $794 psf (excluding Apple), up from $590 psf ($472 psf) at the TTM ended September 2020.

Inline sales were $765 psf ($617 psf) as of the TTM ended March 2019. Macy's and JCPenney reported sales of $212 psf and $184 psf, respectively, compared to $87 psf and $75 psf as of the TTM ended September 2020 and $241 psf and $230 psf as of the TTM ended March 2019. Fitch's base case loss expectation of approximately 14% reflects an 11% cap rate on the YE 2021 NOI.

The third largest contributor to expected losses is Tek Park (FLOC, 2.2%), office and technology park located in Breinigsville, Pennsylvania. This loan transferred to special servicing in January 2022 after the third largest tenant, Buckeye Partners (15.5% of the NRA) did not renew their lease, triggering cash management. Occupancy declined to 61% as of YE 2021 from 79.2% at YE 2020.

Fitch's base case loss of approximately 21.9% uses a 12% cap rate to reflect Fitch's concerns of secular changes in the demand for office properties and a 10% haircut to the YE 2021 NOI to account for recent departure of the third largest tenant.

Minimal Change in Credit Enhancement: As of the September 2022 distribution date, the pool's aggregate balance has been reduced by 6.8% to $734.1 million from $787.5 million at issuance. There are eight loans comprising 10.9% of the pool have been fully defeased. Eight loans (51.5%) are classified as interest only. No loans are scheduled to mature until 2025. The specially serviced loan, Mandeville Marketplace, disposed in December 2019 resulting in a $3.7 million loss to class G.

ADDITIONAL LOSS CONSIDERATIONS

Retail and Regional Mall Concentration: In this transaction, there are 17 loans comprising 47.2% of the pool which are secured by retail properties. At issuance, Fitch classified two mixed-use properties (7th & Pine Seattle Retail & Parking and 1000 K Street) as retail in its analysis due to their primary uses. The pool also includes two super-regional malls Potomac Mills (9.5%) and Fresno Fashion Fair (5.5%).

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Downgrades could be triggered by an increase in pool-level losses from underperforming or specially serviced loans. Downgrades to the classes rated 'AAAsf' are not considered likely due to position in the capital structure but may occur at 'AAAsf' or 'AA-sf' should interest shortfalls occur. Downgrades to classes C and D may occur if overall pool performance declines and/or loss expectations increase and/or 7th & Pine Seattle Retail & Parking transfer to special servicing. Downgrades to classes E and F would occur as losses are realized and/or become more certain.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Upgrades could be triggered by significantly improved performance coupled with paydown and/or defeasance. An upgrade to classes B and C could occur with stabilization of the FLOCs, but would be limited as concentrations increase. Classes would not be upgraded above 'Asf' if there is likelihood of interest shortfalls. Upgrades of class D would only occur with significant improvement in credit enhancement and stabilization of the FLOCs. An upgrade to classes E and F is not likely unless performance of the FLOCs improves, and if performance of the remaining pool is stable.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

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

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

Additional information is available on www.fitchratings.com

(C) 2022 Electronic News Publishing, source ENP Newswire

Stocks mentioned in the article
ChangeLast1st jan.
MACY'S, INC. 0.98% 23.65 Delayed Quote.-9.66%
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Financials (USD)
Sales 2023 24 502 M - -
Net income 2023 1 138 M - -
Net Debt 2023 1 740 M - -
P/E ratio 2023 5,83x
Yield 2023 2,68%
Capitalization 6 409 M 6 409 M -
EV / Sales 2023 0,33x
EV / Sales 2024 0,32x
Nbr of Employees 88 857
Free-Float 86,5%
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Mean consensus HOLD
Number of Analysts 17
Last Close Price 23,65 $
Average target price 23,17 $
Spread / Average Target -2,02%
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Managers and Directors
Jeffrey Gennette President & Director
Adrian V. Mitchell Chief Financial Officer & Executive Vice President
Laura M. Miller Chief Information Officer
Sara L. Levinson Independent Director
Deirdre P. Connelly Independent Director
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