DBRS Upgrades Two Classes of WFRBS Commercial Mortgage Trust 2013-C17

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

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

DBRS also confirmed the ratings on the following classes:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-C at B (high) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating upgrades reflect the continued strong overall performance of the transaction, which has benefited from a collateral reduction of 21.5% since issuance. As of the September 2018 remittance, 78 of the original 84 loans remain in the pool with an aggregate principal balance of $709.8 million. There are seven loans, representing 6.1% of the pool, that are fully defeased. Excluding the defeased loans, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) of 2.32 times (x) and WA debt yield of 14.7%. Based on the servicer’s most recent reporting, the 15 largest loans, which represent 54.9% of the pool, reported a WA net cash flow (NCF) growth of 29.0% over the DBRS issuance figures, with a WA DSCR and debt yield of 2.56x and 14.9%, respectively.

As of the September 2018 remittance, there are 12 loans, representing 12.1% of the pool, on the servicer’s watchlist, and one loan, representing 1.3% of the pool, in special servicing. Only four loans, representing 2.8% of the pool, are being monitored for performance-related issues. The remaining loans on the watchlist are performing well, with a WA DSCR and debt yield of 1.95x and 13.4%, respectively, and are being monitored for deferred maintenance, occupancy declines, and upcoming tenant rollover.

The loan in special servicing, Oak Hill Apartments (Prospectus ID #27, 1.3% of pool), is secured by a 108-unit multifamily property located in Washington, D.C. The loan transferred to special servicing in May 2017 for delinquency and reported an annualized Q1 2018 DSCR of -0.22x, compared with the DBRS Term DSCR derived at issuance of 1.34x. The sponsor, Aubrey Carter Nowell, the founder of Sanford Capital, has been involved in several legal issues over the past few years. Sanford Capital is a property management company based in Maryland which primarily owns and operates multifamily properties located in low-income communities in D.C. DBRS has located articles online noting that Sanford Capital was sued in March 2017 by D.C. Attorney General Karl Racine relating to D.C. housing law violations and as of April 2018, a settlement was reached. As such, Sanford Capital has agreed to divest its real estate holdings in D.C. by December 2018 and will be unable to re-enter the market for the next seven years. According to special servicer, a receiver was appointed in September 2017 and is continuing to address and repair the several open housing violations at the property.

The April 2018 appraisal obtained by the special servicer reported an as-is value for the property at $14.8 million, suggesting value outside of the $9.2 million trust exposure, as of September 2018. In the analysis for this loan, DBRS applied a stressed cash flow scenario to reflect the depressed performance and legal issues surrounding Sanford Capital in recent years. DBRS will continue to monitor the loan for developments. 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 one loan, Westfield Mission Valley (Prospectus ID #3, 7.8% of pool), as investment grade. DBRS confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

Classes X-A, X-B and X-C 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:

-- Westfield Mission Valley (Prospectus ID #3, 7.8% of pool)
-- Staybridge Suites – Minot (Prospectus ID #26, 1.3% of pool)
-- Oak Hill Apartments (Prospectus ID #27, 1.3% of pool)

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 North American CMBS 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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