DBRS Upgrades Three Classes, Confirms Four of FREMF 2013-K33 Mortgage Trust, Series 2013-K33

DBRS Limited (DBRS) upgraded the ratings of three classes of the Multifamily Mortgage Pass-Through Certificates, Series 2013-K33 issued by FREMF 2013-K33 Mortgage Trust, Series 2013-K33 as follows:

-- Class B to AA (sf) from A (high) (sf)
-- Class X2-B to A (sf) from A (low) (sf)
-- Class C to A (low) (sf) from BBB (high) (sf)

In addition, a Positive trend has been assigned for Class B. The trends for Class X2-B and Class C remain Stable.

DBRS also confirmed the ratings of the remaining classes as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X1 at AAA (sf)
-- Class X2-A at AAA (sf)

All confirmed classes have Stable trends.

The rating upgrades and Positive trend assignment for Class B reflects DBRS’s outlook for the pool following the April 2018 defeasance of the pool’s largest loan, which comprises 10.4% of the pool balance. With this defeasance, there are now four loans that have been fully defeased, collectively representing 12.6% of the pool. As of the July 2018 remittance, all original 86 loans remain in the pool with a total collateral reduction of 4.9% since issuance due to loan amortization. There are 78 non-defeased loans, comprising 84.3% of the pool, that are reporting year-end (YE) 2017 financials, with the remaining non-defeased loans reporting a YE2016 figure as the most recent full-year reporting. According to the most recent YE figures, the non-defeased loans reported a weighted-average (WA) DSCR and WA in-place debt yield of 1.80 times (x) and 9.9%, respectively, up from the WA DBRS Term DSCR of 1.44x and WA debt yield of 7.5% for those same loans at issuance. These trends are reflective of a WA net cash flow growth of 25.4% over the DBRS issuance figures for those loans.

In addition to strong cash flow growth from issuance, the pool also benefits from a strong urban and suburban concentration, with 69.7% of the pool balance located in those market types. All partial interest-only (IO) loans are amortizing, with nine loans, comprising 18.7% of the pool, structured with full IO terms.

There are three loans on the servicer’s watchlist, accounting for 6.2% of the pool balance. Two of the loans (Silverado Apartments and Deseo at Grand Mission) are on the watchlist due to storm damage. Servicer commentary stated the repairs at both properties were complete and the insurance claims are expected to be fully resolved in the near future. Only one loan (Lindell Portfolio) was placed on the watchlist for declining financial performance. That loan is secured by a student housing property located near Saint Louis University that has been negatively affected by newer supply to the submarket. The property was recently acquired, and the trust loan was assumed in May 2017. The new sponsor is working toward stabilizing the property and reducing operating costs.

In addition, the transaction included two loans (The Bernardin and Alexan City Center) that permit a one-time substitution of collateral with another multifamily property with no Rating Agency Confirmation requirement. The collateral for Alexan City Center was substituted in March 2017 with a luxury apartment complex located in downtown Tampa known as 2Bayshore Apartments. The cash flows for the replacement collateral are strong and the loan reported a DSCR of 4.35x as of the T-12 ending September 2017. That coverage compares with the DSCR of 3.96x at YE2016 for the loan with the former collateral in place.

Classes X1, X2-A and X2-B are interest-only (IO) certificates that reference 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:

-- Lindell Portfolio (Prospectus ID#4, 3.2% of the pool)
-- 2Bayshore Apartments (formerly Alexan City Center) (Prospectus ID#9, 2.3% of the pool)
-- Deseo at Grand Mission (Prospectus ID#20)

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.

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.