DBRS Confirms Ratings of COMM 2013-CCRE6

DBRS has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE6 (the Certificates), issued by COMM 2013-CCRE6 Mortgage Trust, as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3FL at AAA (sf)
-- Class A-3FX at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (sf)
-- Class PEZ at A (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class G. The Class PEZ certificates are exchangeable for the Class A-M, B and C certificates (and vice versa).

The collateral consists of 48 fixed-rate loans secured by 80 commercial properties. As of the March 2014 remittance report, the pool has a balance of approximately $1.49 billion, representing a collateral reduction of 0.93% since issuance. Based on updated financial reporting, the pool has exhibited stable performance as the largest 15 loans in the transaction have a weighted-average debt service coverage ratio (DSCR) and debt yield of 2.5 times (x) and 11.5%, respectively.

At issuance, DBRS shadow-rated one loan, representing 8.8% of the current pool balance, as investment grade. DBRS has today confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

As of the March 2014 remittance report, there are no delinquent or specially serviced loans, and there are two loans, representing 1.9% of the current pool balance, on the servicer’s watchlist. Both loans remain current and one loan is highlighted below:

The Valley View Shopping Center loan (Prospectus ID#17) is secured by a retail center in Yorba Linda, California. The loan was added to the servicer's watchlist after the property's largest tenant, Orchard Supply Hardware (Orchard) (40.4% of the net rentable area (NRA)), filed for bankruptcy protection in June 2013; however, the subject location was not included on the initial closure list of eight locations. Orchard was subsequently purchased by Lowe's in September 2013, and according to the servicer, the subject location will remain open and will operate under the Orchard brand. The lender has released the total $6.5 million holdback now that Orchard is in occupancy and paying full, unabated rent. Orchard's lease at the property does not expire until December 2027, and the nearest Lowe's to the subject is located ten miles to the southwest. The Q3 2013 DSCR improved to 1.05x as a result of Orchard commencing rental payments in June 2013 when its build-out was complete. As of the September 2013 rent roll, the property was 92.3% occupied with a Sprouts grocery store serving as the property's other anchor tenant. Sprouts’ lease does not expire until YE2020.

At issuance, DBRS highlighted two loans within the transaction that had unique risks. Both loans are highlighted below:

The 540 West Madison Street loan (Prospectus ID#5) is secured by a Class A, LEED-EB certified office building in Chicago. The building features extensive uninterruptable power supply and emergency power supply systems, efficient floor plates with floor-by-floor after-hours heating and cooling, and advanced fiber-optic technology, and could maintain power for up to 72 hours with on-site generators in the event of service interruption. As of January 2014, the property became 76.1% occupied after Bank of America (BofA) executed its first option to give back 166,000 square feet at YE2013. Additionally, BofA has executed its second option to give back another 236,000 square feet at YE2014, which will drop the overall occupancy rate to 54.7% if no new leases are signed throughout the year. DBRS analyzed the loan at issuance assuming some of these additional clauses would be exercised and considered the loan structure in place to account for this risk. To mitigate the rollover of BofA, the loan was structured with over $30 million of tenant improvement/leasing commission reserves in order to sign new tenants. Post 2014, BofA will maintain 32.2% of the NRA on a lease expiring at YE2021. Other large tenants include DRW Trading Group (11.4% of the NRA) and Marsh & McLennan (11.0% of the NRA), with leases expiring in December 2024 and February 2024, respectively.

The Streets of Brentwood loan (Prospectus ID#12) is secured by a lifestyle center in Brentwood, California. The property is anchored by Rave Theatres, REI and DSW, which have lease expirations in January 2024, April 2019 and January 2019, respectively. The property has a diverse rent roll; however, 22 tenants at the property have leases structured with kick-out clauses based on annual sale thresholds. The kick-out clauses allow the tenants to pay a fee and terminate their leases if they are not exceeding their annual sales threshold as defined by their lease. DBRS has yet to receive 2013 sales reporting, but according to 2012 sales, 13 tenants reported sales below their respective sales thresholds. In 2013, Coldwater Creek and Banana Republic exercised their kick-out clauses, paying lease termination fees of $318,527 and $200,000, respectively. The tenants accounted for 4.0% of the NRA and 4.3% of estimated gross income. Four tenants, occupying 5.3% of the NRA, had kick-out clauses that expired in January 2014. DBRS will continue to monitor the performance of the loan given the kick-out clauses that have already been exercised. DBRS is awaiting confirmation from the servicer to determine if any of the tenants exercised their January 2014 kick-out options. DBRS will be focused on lower than expected sales trends and how a potential increase in vacancy may impact the loan’s performance.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool. The March 2014 Monthly CMBS Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is CMBS Rating Methodology (January 2012) and CMBS North American Surveillance (November 2012), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.