DBRS Confirms Ratings on Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9

DBRS Limited (DBRS) has today confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2013-C9 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9 as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since closing. At issuance, the collateral consisted of 60 fixed-rate loans secured by 77 commercial properties. As of the March 2016 remittance, 58 loans remain in the pool out of the original 60 loans with an aggregate outstanding principal balance of $1,195.0 million, representing a collateral reduction of 6.4% as a result of scheduled loan amortization. Loans representing 47.6% of the current pool balance are reporting YE2015 financials, and loans representing 37.9% of the pool have 2015 partial year financials. The nine loans in the top 15 (representing 45.2% of the current pool balance) reporting YE2015 figures showed a weighted-average (WA) amortizing debt service coverage ratio (DSCR) of 1.99 times (x), with WA net cash flow growth over the respective DBRS underwritten figures of 24.8%.

As of the March 2016 remittance, there are no loans in special servicing and six loans on the servicer’s watchlist, representing 8.2% of the current pool balance. However, the largest watchlisted loan, representing 5.2% of the pool, is expected to be removed from the watchlist with the next remittance as performance has improved. One loan in the top 15 and a watchlisted loan are discussed below.

The Best Western Grant Park loan (Prospectus ID#12, 2.0% of the current pool balance) is secured by a nine-storey, 172-room, limited-service hotel in downtown Chicago and was constructed in 1960. According to the YE2015 Smith Travel Research report, the subject property performed below the competitive set with an occupancy of 62.0%, average daily rate (ADR) of $135 and revenue per available room (RevPAR) of $84. In comparison, the competitive set reported an occupancy rate of 75.4%, ADR of $148 and RevPAR of $112. Per the YE2015 financials, the loan reported an amortizing DSCR of 1.44x, which is a decrease from the YE2014 and DBRS underwritten DSCR of 1.59x. Departmental revenue decreased by 10.6% from YE2014 and 3.1% from the DBRS underwritten level and operating expenses are up slightly as well. It was known at closing that all guest rooms and common areas were expected to be renovated at an estimated cost of $3.8 million. The September 2015 site inspection noted $2.1 million of interior capital improvements that were completed, with an additional $1.5 million planned for the renovation of the outdoor pool, deck and exterior walls. DBRS expects the performance decline is related to the ongoing improvement projects and expects cash flows to return to underwritten levels at completion.

The 750 Eight Avenue Retail Condominium loan (Prospectus ID#25, 1.3% of the pool) is secured by an 8,800 square foot retail property in Manhattan, New York, built in 2008. This loan was placed on the servicer’s watchlist because one tenant, Pasta Bar (39.5% of NRA as per the September 2015 rent roll) was evicted from the property in December 2015 ahead of its 2024 lease expiration. With this eviction, 750 Gifts LLC (60.5% of the NRA), a souvenir shop, is the sole tenant at the property. Due to the tenant vacancy trigger, a soft lockbox was sprung and per the loan documents, all funds are to be swept into a cash management account. According to the servicer, a prospective tenant is interested in taking over Pasta Bar’s space and a lease is in the process of being approved; however, lease terms are not available at this time. The YE2015 financials reported a DSCR of 1.19x, which is above the YE2014 DSCR of 1.03x but below DBRS underwritten DSCR of 1.45x. Given the cash flow decline that will be realized in the near term with the occupancy drop at the property, DBRS modelled the loan with a stressed cash flow to reflect the increased risk.

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 (March 2016) and CMBS North American Surveillance (December 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.