DBRS Confirms All Classes of WFRBS Commercial Mortgage Trust 2013-C17

DBRS Limited (DBRS) has today upgraded the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-C17 issued by WFRBS Commercial Mortgage Trust 2013-C17:

-- Class B to AA (sf) from AA (low) (sf)
-- Class C to A (sf) from A (low) (sf)

Additionally, DBRS has confirmed the ratings on the following classes:

-- 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-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class G.

The ratings upgrades reflect the performance of the overall pool as well as the benefit of defeasance collateral in the transaction. At issuance, the transaction consisted of 84 loans secured by 134 commercial and multifamily properties. The pool has since experienced a collateral reduction of 3.1% as the result of scheduled amortization, with all of the original 84 loans remaining in the pool. Three loans, including the second-largest loan, together representing 10.5% of the current pool balance, are fully defeased. Excluding the defeased loans, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) of 2.08 times (x) and a WA debt yield of 13.1% based on YE2015 financials. Comparatively, the prior-year reporting showed a WA DSCR and WA debt yield of 1.90x and 12.1%, respectively.

As of the October 2016 remittance, there are nine loans on the servicer’s watchlist, representing 11.3% of the current pool balance. The largest three loans on the watchlist, representing 7.2% of the current pool balance, were placed on the watchlist for deferred maintenance issues. Each of these loans reported occupancies of at least 90.0% and healthy DSCRs. The loans are expected to be removed from the servicer’s watchlist once the deferred maintenance issues are resolved. One loan on the watchlist is further discussed below.

The Staybridge Suites – Minot (Prospectus ID#26), representing 1.1% of the current pool balance, is secured by a 102-room hotel, built in 2012, located in Minot, North Dakota. This loan was placed on the servicer’s watchlist in August 2015 as a result of a decline in performance, which is directly attributable to the deteriorating market conditions in the area. The region is going through a transition period, as it is heavily reliant on the oil and gas industry. The decline in oil prices over the past several years has had a negative economic impact for the area. The subject property generates most of its room nights from corporate accounts and the servicer reports that the demand segmentation consists of 60% transient business and 40% extended stay. As a result, the overall performance of the market and subject has declined; however, the subject continues to perform near the top of its competitive set. Based on the trailing 12 month April 2016 Smith Travel Research report, the subject reported an occupancy of 68.2%, an average daily rate (ADR) of $100.76 and a revenue per average room (RevPAR) of $68.76. Comparatively, the competitive set reported an occupancy of 52.6%, ADR of $86.92 and RevPAR of $45.76. At YE2014, the subject reported an occupancy of 80.0%, an ADR of $120.57 and a revenue RevPAR of $96.48, while the competitive set reported an occupancy of 62.4%, an ADR of $106.62 and a revenue RevPAR of $66.49. According to the most recent financials, the annualized Q1 2016 DSCR was 0.53x, decreasing from the YE2015 DSCR of 1.08x and the YE2014 DSCR of 1.44x. Given the overall decline in the market and the effects of decreasing demand, DBRS expects this loan to continue to underperform expectations from issuance. As such, this loan was modeled with an increased probability of default.

At issuance, DBRS shadow-rated one loan, Westfield Mission Valley (Prospectus ID#3, representing 6.3% of the current pool balance), as investment grade. DBRS has today confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

The ratings assigned to Classes D, E and F materially deviate from the higher ratings implied by the quantitative model. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative model that is a substantial component of a rating methodology; in this case, the assigned ratings reflect the sustainability of loan performance trends not demonstrated.

For more information on this transaction and supporting data, please log into DBRS CMBS IReports, at www.ireports.dbrs.com. DBRS continues to monitor this transaction monthly with periodic updates provided in the DBRS CMBS IReports platform.

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 (October 2016), 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.