DBRS Confirms Ratings of WFRBS Commercial Mortgage Trust 2013-C17

DBRS, Inc. (DBRS) has today confirmed all classes of WFRBS Commercial Mortgage Trust 2013-C17 as follows:

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

All trends are Stable.

The rating confirmations reflect stable performance of the transaction since issuance in November 2013. The collateral consists of 84 fixed-rate loans secured by 134 commercial and multifamily properties. As of the October 2014 remittance report, the pool has a balance of $897,150,194, representing a collateral reduction of 0.8% since issuance. According to YE2013 reporting, the transaction has a weighted-average debt service coverage ratio (DSCR) of 1.85 times (x) and a weighted-average debt yield of 11.2%. Performance of the 15 largest loans is similarly stable as these loans are reporting a weighted-average DSCR and weighted-average debt yield of 2.04 x and 11.0%, respectively.

At issuance, DBRS shadow-rated one loan, representing 6.1% 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 October 2014 remittance report, there are three loans on the servicer’s watchlist, representing 2.5% of the current pool balance. The largest loan in the watchlist, The Bay Club, representing 1.3% of the current pool balance, has been flagged for non-performance issues related to minor deferred maintenance at the property and is not considered to have an elevated default risk. The remaining two loans on the servicer’s watchlist are discussed below.

Hampton – Shelby Township (Prospectus ID #45, 0.71% of the current pool balance) is secured by a 90-room limited service lodging facility located in Macomb, Michigan, operating under the Hampton Inn flag. This loan was added to the servicer’s watchlist for low DSCR, which has declined to 0.47x as of Q1 2014 compared with 0.95x at YE2013 and the issuer’s UW DSCR of 1.59x. According to the servicer, the decline in performance is a result of unaccounted for Payroll and Benefits expense at the initial underwriting of the loan, which totaled over $500,000 at YE2013. DBRS is waiting for the servicer’s clarification regarding the expense as it is unclear if this expense is reoccurring or if it is being double counted in another expense line item. Hotel operating metrics appear stable as the occupancy, ADR and RevPAR were 81.1%, $99.58 and $80.77, according to September 2014 borrower reporting.

The smallest loan on the servicer’s watchlist, Park Valley (Prospectus ID#53, 0.53% of the current pool balance), is secured by a 279-unit multifamily property located in Cincinnati, Ohio. This loan was added to the servicer’s watchlist for low DSCR, which was 0.78x at Q2 2014, compared with 0.90x at YE2013 and the issuer’s underwritten DSCR of 1.58x. Occupancy at the subject has remained stable ranging from 88.5% to 92.1% since issuance and was most recently reported at 91.8% with an average rental rate of $480/month, according to the June 2014 rent roll. The decline in performance is a result of an increase in utilities expense due to the harsh 2013/2014 winter and unaccounted for Advertising and Professional Fees expenses, which totaled over $85,000 at YE2013. DBRS is also waiting for the servicer’s clarification regarding these expenses as it is unclear if this expense is reoccurring or if it is being double counted in other expense line items.

The DBRS analysis included an in-depth review of the 15 largest loans in the transaction and the loans on the servicer’s watchlist, which collectively represent 56.9% of the current pool balance.

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 November 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.

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.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.