DBRS Confirms Ratings of WFRBS Commercial Mortgage Trust 2013-C18

DBRS Limited (DBRS) has today confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2013-C18 (the Certificates), issued by WFRBS Commercial Mortgage Trust 2013-C18 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-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class PEX at A (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
-- Class X-A at AAA (sf)

All trends are Stable. The Class PEX certificates are exchangeable with the Class A-S, Class B and Class C certificates (and vice versa).

The rating confirmations reflect that the current performance of the transaction remains stable. The collateral consists of 67 fixed-rate loans secured by 73 commercial properties. According to YE2014 financials, the pool had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 2.18x times (x) and 11.5%, respectively, compared with the DBRS UW figures of 2.05x and 11.3%, respectively. As of the November 2015 remittance, the pool had an aggregate balance of approximately $1.0 billion, representing a collateral reduction of 1.4% since issuance due to scheduled loan amortization. The transaction benefits from a concentration of loans secured by properties located in urban and suburban markets, representing 56.4% and 37.1% of the current pool balance, respectively. The pool is also concentrated by loan size, as the five largest loans represent 52.7% of the current pool balance. As a result, a concentration penalty was applied to mitigate the pool’s lack of diversity, increasing the pool-wide POD. DBRS has highlighted one loan below that is not currently on the servicer’s watchlist, but has recently experienced a decline in performance.

The JFK Hilton loan (Prospectus ID# 4, 6.6% of the current pool balance) is secured by the fee interest in a 12-story, 356-key full-service Hilton hotel located adjacent to the John F. Kennedy Airport in Jamaica, New York. The property was originally constructed in 1987 as a Holiday Inn, subsequently run as an independent hotel for a period of time and rebranded to a Hilton in 2012 at a total renovation cost of $21.0 million ($59,000 per key). As of Q2 2015 financials, the loan had a DSCR of 1.17x, compared to 1.30x at YE2014 and the DBRS UW figure of 1.53x. The decline in performance was a result of a 10.0% increase in total operating expenses, predominantly due to increases in Franchise Fees (20.0%), Advertising and Marketing (47.0%) and General and Administrative (7.2%) costs since issuance. According to the borrower’s June 2015 operating statement, the property reported a year-to-date occupancy rate of 90.1%, an ADR of $168.78 and a RevPAR of $151.99, compared with 88.8%, $167.16 and $148.51, respectively, as of March 2014. New supply in the area consists of a 201-key Holiday Inn and a 330-key Crown Plaza, which opened for business as of November 2013 and January 2014, respectively. The subject has historically outperformed its competition and DBRS considers the subject property and brand affiliation to be superior to the new competition. According to the October 2014 Smith Travel Accommodations Report (STAR), the property reported a year-to-date occupancy rate of 92.3%, an ADR of $171.08 and a RevPAR of $158.54, respectively, compared to its competitive sets (inclusive of the new supply) of 78.7%, $150.88 and $118.72, respectively.

As of November 2015 remittance, there were no loans in special servicing and three loans on the servicer’s watchlist representing 0.7% of the current pool balance. Two of these loans, Creekside Estate MHC (Prospectus ID#48, 0.3% of the current pool balance) and Capri Commons (Prospectus ID#63, 0.1% of the current pool balance), were flagged due to items of deferred maintenance. The remaining loan was flagged for a low DSCR; however, the loan is secured by a co-op property in Forest Hills, New York, and the loan has a current LTV of 13.8%.

At issuance, DBRS assigned an investment-grade shadow rating to two loans, Garden State Plaza (Prospectus ID#1, 14.5% of the current pool) and The Outlet Collection – Jersey Gardens (Prospectus ID#3, 13.6% of the current pool balance). DBRS has today confirmed that the performance of these loans remain consistent with the 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, including details on the largest loans in the pool and loans on the servicer’s watchlist. The November 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 Canadian 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.

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.

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.