KBRA Downgrades All Ratings for DBUBS 2011-LC3 Providence Place Mall

KBRA downgrades the ratings of six classes of PM certificates for DBUBS 2011-LC3, a CMBS conduit/fusion transaction. The PM classes are rake certificates that derive 100% of their cash flow from the non-pooled components of the Providence Place Mall loan. No other classes issued by DBUBS 2011-LC3 are rated by KBRA. The downgrades are primarily the result of a continued decline in the loan’s KNCF and value along with its non-performing status with the special servicer. In determining the rating actions, KBRA also considered the potential for interest shortfalls, which are currently impacting the PM-3, PM-4, and PM-5 classes, to reach higher in the capital stack as the special servicer works to resolve the loan, as well as potential principal losses and recoveries.

The Providence Place Mall loan is the largest exposure in DBUBS 2011-LC3, with an outstanding principal balance of $254.9 million ($251 per sf) as of the May 2025 distribution date. The loan previously transferred to special servicing in April 2021 as a refinance could not be secured by the borrower prior to its May 2021 maturity date. It was subsequently modified in August 2021 and the maturity date was extended to May 2022 with two additional one-year extension options. Additionally, the loan was changed to full IO after the closing date of the modification and included a full cash flow sweep. The final maturity was May 6, 2024, and according to the revised May 2025 reporting, the loan is matured and non-performing and there is a $65.9 million ARA and a corresponding $846,165 ASER. A receiver took control of the property after no acceptable modification proposals were made by the sponsor, Brookfield Property Partners (BPY). According to the servicer’s commentary, the receiver was appointed in November 2024 and is working with the property manager to stabilize the property and position it for a future sale. The excess cash flow reserve account has a balance of $17.1 million.

The transaction collateral is a single, non-recourse, first lien mortgage loan secured by the borrower’s leasehold interest in a 1.0 million sf portion of Providence Place Mall, a 1.2 million sf super-regional mall located in Providence, Rhode Island. The land underlying the property is leased from the Rhode Island Economic Development Corporation under a 99-year ground lease expiring in 2096, with four 99-year extension options remaining. The mall is currently anchored by Macy’s (non-collateral), Boscov’s (19.4% of collateral sf), which backfilled the former Nordstrom anchor space in October 2019, and Providence Place Cinemas 16 & IMAX (9.4%). According to the servicer, the non-collateral Macy’s is on the list of locations planned for closure.

KBRA analyzed the cash flow for the property utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $18.7 million and a KBRA value of $172.7 million ($176 per sf), which considers a distressed liquidation value of the asset. The resulting in-trust KLTV is 147.6%, compared to 139.8% at KBRA’s last ratings change in June 2024 and 70.2% at securitization. The KBRA value implies that the trust may incur losses upon payoff or disposition of the asset. An appraisal dated June 2024 valued the property at $191.0 million ($195 per sf), which represents a 65.8% decrease from its $558.0 million ($569 per sf) value at securitization. KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on its matured non-performing status with the special servicer along with declining financial performance and underlying value of the asset.

Details concerning the classes with rating changes are as follows:

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