DBRS Confirms Ratings of MSBAM 2013-C7

DBRS, Inc. (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-C7 (the Certificates) issued by Morgan Stanley Bank of America Merrill Lynch Trust 2013-C7:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 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 (sf)
-- Class PST at A (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

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

The collateral consists of 64 fixed-rate loans secured by 123 commercial properties. As of the January 2015 remittance report, the pool has a balance of approximately $1.36 billion, representing a collateral reduction of approximately 2.42% since issuance in January 2013. The pool has exhibited stable performance since issuance, as the top 15 loans report a debt service coverage ratio (DSCR) of 1.98 times (x), as well as a current and exit debt yield of 10.0% and 11.5%, respectively.

At issuance, DBRS shadow-rated two loans, Valley West Mall (Prospectus ID#7) and Sunvalley Shopping Center (Prospectus ID#17), representing 5.3% of the current pool balance, as investment grade. DBRS has today confirmed that the performance of the loans remains consistent with the performance of an investment-grade loan.

As of the January 2015 remittance report, there is one specially serviced loan and there are two loans on the servicer’s watchlist, representing 1.2% and 2.8% of the current pool balance, respectively.

The Oakridge Office Park loan (Prospectus ID#25) is secured by an office and data center complex located in Orlando, Florida. The loan transferred to special servicing in June 2014 after the borrower was unable to make principal and interest payments in light of Stenotype Institute’s bankruptcy (9.5% of net rentable area (NRA)) and AT&T’s vacating almost half of its space (33.8% of NRA), reducing the property’s occupancy rate to 48.4%. The special servicer and the borrower entered into a six-month forbearance period in order to allow the borrower time to lease up the property; however, there was no progress, and the borrower provided a stipulated foreclosure and deed in lieu to the lender. According to the servicer, a receiver was installed in the first week of January 2015. The forbearance period allowed the borrower to make interest only payments in November 2014 and December 2014; however, the loan is currently due for all other principal and interest payments from August 2014 forward. According to the special servicer, it will attempt to lease up the property before disposing the loan from the trust. The property was valued at $24.0 million at issuance, and DBRS is awaiting an updated third-party appraisal of the subject that reflects the property’s current state.

The Concorde Green Retail loan (Prospectus ID#15) is secured by a grocery-anchored retail center in Glendale Heights, Illinois. The loan was added to the servicer’s watchlist for a low DSCR, which was reported to be 0.75x by the servicer as of YE2013. The poor performance is attributed to rent abatements, as the largest tenant, Vali Foods (49% of NRA), and a second tenant, Blast Fitness (9% of NRA), did not begin paying full unabated rental payments until May 2013. According to the August 2014 rent roll, the property was 98% occupied, and according to the Q2 2014 operating statement analysis report, net cash flow has shown an increase of 12.7% compared with YE2013. As rent abatements have expired, property performance is expected to stabilize.

DBRS continues to monitor the Le Meridien Parker Palm Springs loan (Prospectus ID#10), which is secured by a full-service luxury hotel in Palm Springs, California. At issuance, DBRS identified this loan to have a risk of potential technical default after the franchisor, Starwood Hotels (Starwood), filed a lawsuit against borrower. Starwood’s franchise agreement at the subject hotel, which originally expired at YE2014 was recently extended to January 2017. It is the opinion of DBRS that the hotel would be able to maintain its current level of performance as an independent hotel if the franchise agreement with Starwood were to either expire or be removed.

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 January 2015 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 Methodology (January 2015), which can be found on our website under Methodologies.

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