DBRS Confirms All Classes of Citigroup Commercial Mortgage Trust 2013-GC15

DBRS Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-GC15 issued by Citigroup Commercial Mortgage Trust 2013-GC15:

-- 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-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-C at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (sf)
-- Class PEZ at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class G. The Class A-S, Class B and Class C certificates may be exchanged for the Class PEZ certificates (and vice versa).

The rating confirmations reflect the performance of the transaction since issuance in September 2013. The collateral consists of 92 fixed-rate loans secured by 129 commercial and multifamily properties. As of the June 2016 remittance, the pool has experienced a collateral reduction of 2.9% since issuance as a result of loan amortization, with all of the original 92 loans remaining in the pool. The pool reported a weighted-average (WA) debt service coverage ratio (DSCR) of 1.55 times (x) and a WA debt yield of 10.1% based on YE2015 financials. At issuance, the pool reported a WA DSCR and debt yield of 1.51x and 9.4%, respectively. One loan, representing 0.4% of the current pool balance, is fully defeased.

As of the June 2016 remittance, there are 12 loans on the servicer’s watchlist, representing 9.2% of the current pool balance; however, the majority of the loans, including all three loans individually representing over 1.0% of the pool balance, are on the watchlist for non-performance-related issues related deferred maintenance items. There are also two loans in special servicing, representing 1.0% of the current pool balance. One of the loans in special servicing and the largest loan in the transaction are further discussed below.

The largest loan in the pool is South Beach Marriott (Prospectus ID#1, representing 6.0% of the current pool balance). This loan is secured by an 11-storey, 236-key, full-service hotel located on South Beach in Miami, Florida. The hotel operates under the Marriott flag with a franchise agreement expiring in 2030. The property underwent a total room renovation that was completed at the end of 2013 at a cost of $8.0 million, according to the August 2014 site inspection. Based on the most recent site inspection completed in May 2016, the property is in above-average condition. According to YE2015 financials, the loan reported a DSCR of 1.66x, down from the YE2014 DSCR of 2.65x and the DBRS underwritten DSCR of 2.74x. The main drivers for the decrease in cash flows are a decline in effective gross income and an increase in operating expenses. General and administrative expenses increased by 21.1% over underwritten levels, while the advertising and marketing expense increased by 15.8%. According to the Smith Travel Research May 2016 report, the trailing 12-month occupancy was 77.7%, with an average daily rate (ADR) of $275.46 and revenue per available room (RevPAR) of $214.11. Compared with its competitive set, the subject is underperforming across all three metrics. The competitive set reported an occupancy, ADR and RevPAR over the same period of 80.5%, $278.64 and $224.22, respectively. The subject experienced a year-over-year increase in occupancy of 4.9%; however, ADR and RevPAR decreased by 10.3% and 5.9%, respectively. This change is similar to the year-over-year changes captured by the performance of the competitive set.

The City Center Building loan (Prospectus ID#67, representing 0.5% of the current pool balance) is secured by a mixed-use building that consists of 22,220 square feet (sf) of office space and 7,873 sf of retail space, located in downtown Kissimmee, Florida. The building is a part of a larger mixed-use development that includes residential units and other commercial buildings. This loan was transferred to the special servicer in December 2015 for imminent default. The Borrower has stated that it will no longer be able to make the debt service payments and has been co-operative with the special servicer. The special servicer will file for foreclosure and appoint a receiver for the property. As of March 2016, the property was 47.8% occupied following the departure of three tenants prior to their respective lease expirations. According to YE2015 financials, the DSCR was 0.80x, down from the YE2014 DSCR of 1.43x. An updated appraisal dated April 2016 valued the property at $4.0 million, which is a decrease from the July 2013 appraised value of $6.9 million and equates to $120.52 per square foot (psf). According to Real Capital Analytics, within a 25-mile radius from the subject, three office properties have been sold in the last 18 months for an average of $185.26 psf. There were 14 retail properties under 50,000 sf that were sold at an average of $209.89 psf. Based on the updated appraised value and the current loan balance of $4.9 million, DBRS expects the trust to experience a loss with the resolution of the loan.

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.

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.

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.