DBRS Confirms Ratings of Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9

DBRS has today confirmed the ratings of Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9, as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-3FL at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (low) (sf)
-- Class H at B (low) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class A-3FX at AAA (sf)
-- Class PST at A (sf)

All classes have Stable trends. DBRS does not rate the first loss piece, Class J. The Class A-3FX certificates are exchangeable with the Class A-3FL certificates (and vice versa) and the Class PST certificates are exchangeable with the Class A-S, Class B and Class C certificates (and vice versa).

The rating confirmations reflect the overall stability of the pool’s performance since issuance in May 2013. The transaction consists of 60 loans secured by 77 commercial real estate properties. The pool has experienced collateral reduction of 0.88% since issuance as a result of scheduled loan amortization. The transaction benefits from loans secured by properties located within urban markets representing 35% of the current pool balance, and loans secured by properties located within tertiary and rural markets representing only 16% of the current pool balance. Additionally, loans secured by retail properties represent only 33% of the current pool balance. However, the transaction is concentrated by loan size, as the largest ten loans represent 57% of the transaction. As of the May 2014 reporting period, nine of the ten largest loans are reporting YE2013 financials, which is considered strong for the first year of a transaction. These nine loans reported a stable weighted-average debt service coverage ratio (DSCR) of 1.68 times (x). There is one loan on the servicer’s watchlist, representing 0.65% of the current pool balance, highlighted below.

The Bethesda Walk loan (Prospectus ID#34) is secured by an anchored retail property in Lawrenceville, Georgia, located approximately 25 miles northeast of the Atlanta central business district. The loan was added to the servicer’s watchlist after the YE2013 DSCR decreased to 0.98x. The decline in performance was a result of two in-line tenants at the center ceasing to make rental payments. The tenants combined, occupy 9.0% of the net rentable area (NRA) and contributed 11.0% of the property’s base rental income at issuance. According to the servicer, the tenants remain in occupancy at this time as no immediate action has been taken by the borrower. The property remains well occupied as the March 2014 rent roll reported an occupancy rate of 93%. The subject benefits from being anchored by a Wal-Mart neighborhood center, the newest concept for Wal-Mart. The neighborhood center concept is characterized by its smaller footprint and its focus on grocery and everyday items. Wal-Mart occupies 65% of the NRA on a lease expiring in May 2027.

The largest loan in the transaction is the Milford Plaza Fee loan (13.04% of the current pool balance), which is secured by the ground leased fee interest under a hotel condominium of the Milford Plaza Hotel in Midtown Manhattan. The collateral was purchased in 2013 for $350 million by Highgate Holdings and Rockpoint Group. The sponsors previously purchased the building in 2010 and have since invested $154.5 million to complete full room and lobby renovations, which were completed in the summer of 2013. According to the January 2014 STR report, hotel performance remains strong as the trailing 12 months occupancy rate, average daily rate and revenue per available room were 90.6%, $194.93 and $176.57, respectively; all of which compared similarly to its competitive set. The ground lease does not expire until 2112.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction. The May 2014 monthly 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.

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

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