DBRS Confirms Ratings of COMM 2013-CCRE10 Mortgage Trust

DBRS, Inc. (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE10 (the Certificates) issued by COMM 2013-CCRE10 Mortgage Trust:

-- Class A-1 at AAA (sf)
-- 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-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (sf)
-- Class PEZ at A (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

The Class PEZ certificates are exchangeable for the Class A-M, B and C certificates (and vice versa).

All trends are Stable, with the exception of Class F on which DBRS has maintained the Negative trend it assigned at last review to reflect the ongoing concern and uncertainty surrounding the loan in special servicing, Prospectus ID #15, Strata Estates (1.8% of the pool).

The transaction collateral consists of 59 fixed-rate loans secured by 87 commercial properties. As of the July 2016 remittance report, the pool has seen a collateral reduction of 3.6% since issuance, with all of the original loans remaining in the pool. Overall, performance metrics have remained healthy since issuance, with a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.90 times (x) and 11.8%, respectively. These figures compare with the DBRS underwritten WA DSCR and WA debt yield of 1.62x and 9.9%, respectively.

As of the June 2016 remittance report, there are eight loans on the servicer’s watchlist, representing 12.7% of the pool balance. Four of these loans are on the watchlist for relatively minor deferred maintenance items. All four loans show stable financial performance with a WA YE2015 DSCR of 1.59x. Two of the watchlisted loans are being monitored for upcoming tenant rollover, and the remaining two loans, The Worcester Multifamily Portfolio (Pros ID#14, 2.4% of the pool) and 1411 Fourth Avenue (Pros ID#16, 1.9% of the pool), are being monitored for performance issues and were assigned an elevated probability of default to account for the increased risks associated with each.

The Strata Estates Suites loan is secured by a 134-unit corporate housing portfolio comprising two properties located in two North Dakota cities situated around the Bakken and Three Forks oil formation. One property is located in Williston, North Dakota, and the other is located in Watford City, North Dakota, and the properties were built in 2009 and 2011, respectively. The loan was transferred to special servicing in February 2014 because of payment default, and the property is now in foreclosure with a receiver in place. As of the March 2016 rent roll, the portfolio was 37.3% occupied, with an average rental rate of approximately $1,845 per unit as compared with the issuance average of $4,615 per unit. The servicer calculated a Q1 2016 DSCR of 0.03x.

The most recent appraisal obtained by the special servicer is dated October 2015 and estimates the value of the portfolio at $14.54 million ($108,000/unit) compared with $41.0 million ($305,970/unit) at issuance. However, DBRS believes this estimate may be aggressive given the July 2016 valuation of $2.5 million ($60,600/unit) for another specially serviced asset in the area, Pheasant Ridge II, a property located in Watford City and secured in the COMM 2014-CCRE19 transaction with a value of $9.5 million ($226,000 per unit) at issuance. According to Real Capital Analytics and recent industry commentary, there have been no transactions in the area in the past several years, as servicers and property owners appear to be waiting out the downturn in the oil and gas markets before marketing properties for sale. Given the uncertainty in the market and the possibility that even the significantly depressed value estimate obtained by the servicer in October 2015 is high, DBRS estimates the loss severity on this loan could hover near 100.0% at disposition. These factors support the Negative trend assignment for the lowest rated Class F certificates; DBRS expects to maintain the Negative trend long term, as the resolution for this loan remains uncertain.

At issuance, DBRS shadow-rated two loans as investment grade, including the largest loan in the pool, Prospectus ID#1, One Wilshire (10.3% of the pool) and the another loan in the Top 15, Prospectus ID#4 (5.0% of the pool). Combined, these two loans represent 15.3% of the current pool balance. DBRS has today confirmed that the performance of these loans remains consistent with investment-grade loan characteristics.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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.