DBRS Confirms COMM 2013-CCRE8 Mortgage Trust Ratings

DBRS Limited (DBRS) has today confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE8 (the Certificates) issued by COMM 2013-CCRE Mortgage Trust 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-5 at AAA (sf)
-- Class A-SBFL at AAA (sf)
-- Class A-SBFX at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at B (high) (sf)

DBRS does not rate the first loss piece, Class G. All trends are Stable. The Class A-SBFX certificates are exchangeable with the Class A-SBFL certificates (and vice versa).

The rating confirmations reflect the overall stability of the pool’s performance since issuance in June 2013. The collateral consists of 59 fixed-rate loans secured by 94 commercial properties. As of the February 2015 Remittance Report, the transaction has a balance of $1.37 billion, representative of collateral reduction of 1.53% since issuance. According to the most recent year-end financial reporting, the transaction has a weighted-average debt service coverage ratio (DSCR) and weighted-average debt yield of 1.90x and 9.6%, respectively. Net cash flow growth for the top ten loans is strong as these loans have experienced a weighted-average year-over-year net cash flow increase of 23.0%.

As of the February 2015 reporting period, there is one loan in special servicing and three loans are on the servicer’s watchlist, cumulatively representing 0.8% and 2.5% of the current pool balance, respectively. Two of the three loans on the servicer’s watchlist have reportedly experienced an increase in occupancy recently, and performance is likely to improve. The specially serviced loan and one loan on the servicer’s watchlist are highlighted below.

The Georgetown MHC Portfolio loan is secured by three adjacent manufactured housing communities (MHCs) in Georgetown, Kentucky, totaling 502 pads. The property is located ten miles north of Lexington. The loan transferred to special servicing due to payment default in March 2014. According to the servicer, property performance suffered from late-paying tenants and the effects of the previous harsh winter, resulting in the freezing of several tenants’ pipes, and other deferred maintenance items. The special servicer is currently pursuing foreclosure and CF Lane was installed as receiver in late May 2014. CF Lane has since corrected the deferred maintenance, collected past due rent and is paying all operating expenses. Based in Atlanta, CF Lane specializes in operating multifamily and MHC properties, with a portfolio of 3,000 MHC pads in eastern Kentucky. According to the servicer, the subject portfolio was 81.0% occupied as of December 2014, down from 94.0% in May 2014. An updated appraisal dated January 2015 valued the collateral portfolio at $12.5 million ($24,900/pad), down from $16.2 million at issuance ($32,270/pad). While this represents a decrease in value since issuance, the current appraised value remains greater than the total outstanding loan exposure of approximately $10.8 million ($21,460/pad).

The 20 Pine Street loan was added to the servicer’s watchlist due to occupancy decline and subsequent decrease in DSCR. The loan is secured by a 44-story mixed-use property, located in the Financial District of downtown Manhattan, built in 1928 and renovated from 2006 to 2008. The collateral consists of the retail space below the multifamily units. The occupancy rate dropped to 66.0% after a previous tenant vacated (8.0% of the NRA) its space prior to lease expiry. As a result, the YE2013 DSCR declined to 0.8x. Property performance is expected to improve as FedEx signed a lease in January 2015 and another undisclosed tenant is currently in negotiations with the borrower to sign a lease. Combined, both leases would represent 25.4% of the NRA, potentially increasing the subject’s occupancy rate to 91.7%. In comparison, the property was only 74.0% occupied at issuance. Based on leasing activity, the property performance is expected to stabilize in mid-2015, as both tenants are expected to commence rent payments in April 2015 and June 2015, respectively.

At issuance, DBRS shadow rated 375 Park Avenue (Prospectus ID#1; 15.2% of the pool balance) and The Paramount Building (Prospectus ID#6; 4.00% of the pool balance), representing 19.2% of the current pool balance, as investment grade. DBRS has today confirmed that the performance of the loans remains consistent with investment-grade loan characteristics.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction. The February 2015 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.