DBRS Discontinues One Class and Confirms Remaining Classes of COMM 2013-CCRE10 Mortgage Trust

DBRS Limited (DBRS) discontinued one class of the Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE10 (the Certificates) issued by COMM 2013-CCRE10 Mortgage Trust as follows:

-- Class A-1

DBRS also confirmed the remaining classes of the Certificates 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-M at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

Class A-1 was discontinued as it has been repaid as of the June 2018 remittance. The Class PEZ certificates are exchangeable for the Class A-M, Class B and Class C certificates (and vice versa).

All trends are Stable, with the exception of Class F, which carries a Negative trend. The Negative trend has been maintained pending the resolution of the loan in special servicing, Strata Estates (Prospectus ID #15, 1.8% of the pool). DBRS analyzed this loan with a stressed scenario and expects a loss near 100% could be realized at liquidation.

The rating confirmations reflect the performance of the transaction since issuance, with a healthy level of collateral reduction and generally strong cash flow growth for the largest loans in the pool. At issuance, the collateral consisted of 59 fixed-rate loans secured by 87 commercial properties. As of the June 2018 remittance report, 54 loans remain in the pool, with a collateral reduction of 11.6%, as a result of scheduled loan amortization. The pool also benefits from defeasance, as five loans, including two in the top 15, are fully defeased, representing 10.0% of the pool. Loans representing 81.6% of of the pool reported YE2017 financials, with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.91 times (x) and 12.1%, respectively. Excluding the defeased loans, the largest 15 loans all reported YE2017 financials, with a WA DSCR and WA debt yield of 2.02x and 12.1%, respectively, representing a WA cash flow improvement of 19.5% over the DBRS net cash flow figures derived at issuance.

As of the June 2018 remittance, there are 13 loans, representing 27.2% of the pool, including four loans in the top 15, on the servicer’s watchlist. Six of the loans are being monitored for deferred maintenance. An additional four loans (5.0% of the pool) are being monitored for loan maturity dates in July and August 2018. In general, these loans reported healthy debt yields based on the most recent financial reporting available and DBRS expects all four will successfully repay in the near term. Of the remaining three watchlisted loans, two loans have performance and occupancy issues, while the remaining loan is being monitored due to the collateral property’s exposure to the bankruptcy filing and store closures for Toys “R” Us.

The largest loan on the watchlist for cash flow declines, 1411 Fourth Avenue (Prospectus ID #14, 2.1% of the pool), is secured by an office property in Seattle and, as of YE2017, reported a DSCR of 0.50x and an occupancy rate of 24.7%. The loan’s depressed cash flow and occupancy rate is primarily due to extensive renovations currently underway at the property. The renovations are in preparation for the conversion of the vacant office space into WeWork spaces. WeWork will be occupying 72.8% of net rentable area once the final lease approvals are obtained from the servicer. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

There is one loan, representing 1.9% of the pool, in special servicing. Strata Estates Suites (Prospectus ID #15), is secured by two multifamily properties located in Williston, North Dakota, and Watford City, North Dakota. The loan has been delinquent since November 2013 and transferred to special servicing in February 2014. Performance at the property has been severely affected by the downturn in the oil industry, resulting in periods of 100% vacancy. Short-term leases and rent concessions have been offered to increase occupancy but as of YE2017, DSCR was reported at just 0.10x. In DBRS’s analysis, DBRS assumed a loss severity approaching 100% based on the most recent appraised value of $6.9 million as of August 2017. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

At issuance, DBRS shadow-rated two loans as investment grade: the largest loan in the pool, One Wilshire (Prospectus ID #1, 10.4% of the pool) and Raytheon & DirecTV Buildings (Prospectus ID #4). As of June 2018, the Raytheon & DirecTV Buildings loan is fully defeased. DBRS has today confirmed that the performance of One Wilshire remains consistent with investment-grade loan characteristics.

Class X-A is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID #1 – One Wilshire
-- Prospecuts ID #9 – Center Pointe Plaza I
-- Prospectus ID #15 – Strata Estate Suites
-- Prospectus ID #16 – 1411 Fourth Avenue

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.