DBRS Confirms Ratings on FREMF 2013-K33 Mortgage Trust

DBRS Limited (DBRS) has today confirmed the ratings on FREMF 2013-K33 Mortgage Trust, Series 2013-K33 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at A (high) (sf)
-- Class C at BBB (high) (sf)
-- Class X1 at AAA (sf)
-- Class X2-A at AAA (sf)
-- Class X2-B at AAA (sf)

The trends on all classes are Stable. DBRS does not rate the first loss bond, Class D.

The rating confirmations reflect the performance of the transaction since issuance. The collateral consists of 86 fixed-rate loans secured by 88 multifamily properties. As of the August 2015 remittance report, the pool has a balance of approximately $1.63 billion, representing a collateral reduction of approximately 1.0% since issuance in October 2013. Overall, the loans in the pool have reported stable performance. According to YE2014 reporting, the pool had a weighted-average (WA) debt service coverage ratio (DSCR) of 1.8 times (x). Performance of the top 15 loans is slightly stronger as these loans are reporting a YE2014 WA DSCR of 2.01x.

As of the August 2015 remittance report, there are four loans on the servicer’s watchlist, representing 4.6% of the current pool, and no delinquent or specially serviced loans. Three of the four loans on the watchlist are flagged for deferred maintenance items that are not expected to affect financial performance. The last loan on the watchlist is highlighted below.
The Aspen Heights – Phase 2 loan (Prospectus ID#8; 2.3% of the pool balance) is secured by a 284-unit, cottage-style student-housing complex located two miles south of the University of Texas at San Antonio, that was built in 2012. The loan has experienced a decrease in net cash flow of 24.4% from the prior year because of a significant increase in the Advertising and Marking expense. According to the servicer, there was a one-time promotion whereby the borrower gave each new lessee a gift card, which increased Advertising and Marketing expense by 886% to $452,000 from approximately $51,000. The expense was unexpected; however, this large marketing expense may continue as all surrounding student-housing properties offer gift cards and prepaid visas to entice students to sign leases. As of the March 2015 rent roll, the property was 94% occupied with an average rental rate of $567 per bed. At issuance, the property was 100% occupied, with an average rental rate of $601 per bed. The loan reported a DSCR of 1.02x at YE2014 compared with the DBRS underwritten DSCR of 1.29x. At issuance, two student-housing developments were expected to begin construction directly south of the subject; however, as of the September 2014 servicer site inspection, there was no indication that construction had commenced. Despite the subject being the furthest student-housing property in the subset, the property offers shuttle service to and from campus, is one of the newest properties on the market and is conveniently located near a grocery store and a Costco Wholesale.

The DBRS analysis included an in-depth review of the top 15 loans and the loans on the servicer’s watchlist, which represent 44.8% 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 and loans on the servicer’s watchlist. The August 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 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.

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

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

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