DBRS Morningstar Confirms All Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2013-C7

DBRS Limited (DBRS Morningstar) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2013-C7 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2013-C7 as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (sf)
-- Class C at AA (low) (sf)
-- Class PST at AA (low) (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

All trends are Stable.

The rating confirmations reflect the overall performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. As of the February 2020 remittance, there was a collateral reduction of 25.4% as a result of scheduled amortization. Five loans, representing 4.75% of the current pool balance, are fully defeased including one loan in the top 15, Court at Grant Avenue, representing 2.7% of the current pool balance.

Loans representing 95.3% of the current pool balance showed a YE2018 analysis in the servicer’s reporting, with a weighted-average (WA) debt service coverage ratio (DSCR) of 1.82x and WA debt yield of 10.9%. The largest 15 nondefeased loans in the pool represent 71.8% of the current pool balance. These loans reported YE2018 cash flows, a WA YE2018 DSCR of 1.42x, and partial-year 2019 WA DSCR of 1.32x. In addition to the stable in-place coverage ratios for the underlying loans, the pool also benefits from the strong credit metrics for many of the largest loans in the pool, including the largest and third-largest loans, Prospetus ID#1 - Chrysler East Building and Prospectus ID#3 - Millenium Boston Retail, which represent 15.9% and 9.2% of the current pool balance, respectivley.

The Chrysler East Building loan is secured by a 767,000 square foot (sf) Class A office building in Midtown Manhattan that benefits from recent occupancy increases. The Millenium Boston Retail loan is secured by a 272,000 sf mixed-use building secured by the borrower’s condominium interest in the retail portions of the North and South towers at Millenium Place and the retail portion of One Charles Street in Boston. Both loans have reported consistent performance metrics since issuance.

The transaction is exposed to a concentration of retail properties in the top 10 nondefeased loans in the pool, a factor that is particularly noteworthy given the Coronavirus Disease (COVID-19) outbreak and its impact to retail traffic nationwide as mayors and governors, as well as company chief executive officers alike, have taken measures to address the virus’ spread by ordering stores and restaurants to close. DBRS Morningstar is actively monitoring these events as they unfold and will provide updated information on the DBRS Viewpoint platform with regard to property- and loan-specific impacts as information becomes available.

As of the February 2020 remittance, there were nine loans on the servicer’s watchlist, representing 16.0% of the current pool balance. Three of those loans are on the watchlist for DSCR-related issues, while five loans are on the list for occupancy declines. The largest watchlist loan, Prospectus ID#8 – Barnett Industrial Portfolio, representing 4.8% of the current pool balance, has major tenants with leases expiring. DBRS Morningstar applied a probability of default penalty in the analysis to increase the expected loss in the model output for that and other loans exhibiting higher risks from issuance.

As of the February 2020 remittance, there were two loans in special servicing, representing 6.1% of the current pool balance. The first loan, Prospectus ID#7 – Valley West Mall, representing 4.2% of the current pool balance, transferred for imminent default after precipitous hits to performance over the past few years, including losing an anchor and declining sales. The second loan, Pospectus ID#19 – 494 Broadway, representing 1.9% of the current pool balance, was transferred to special servicing for imminent default tied to a decline in property cash flows that stemmed from a low occupancy rate at the mixed-use property and declining market conditions. DBRS Morningstar liquidated both of these loans from the pool for this analysis, with a loss severity of 54.3% and 50.4%, respectively, based on its loss projections for each.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Classes X-A and X-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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#7 – Valley West Mall (4.2% of the pool)
-- Prospectus ID#8 – Scripps Research Building (3.0% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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