DBRS Morningstar Confirms All Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9, Changes Trend on One Class to Negative from Stable

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-C9 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9 as follows:

-- 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-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 (high) (sf)
-- Class C at AA (sf)
-- Class PST at AA (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class F at BBB (sf)
-- Class G at BB (high) (sf)
-- Class H at B (high) (sf)

The trends on all classes are Stable, with the exception of the trend on Class H, which was changed to Negative from Stable.

The Negative trend is largely reflective of the increased risk factors for the pool in the extended delinquency of the largest loan in the pool, Milford Plaza Fee (Prospectus ID#1, 17.9% of the pool), which is in special servicing, and the occupancy declines for the collateral property backing the largest loan on the servicer’s watchlist in Apthorp Retail Condominium (Prospectus ID#5, 6.1% of the pool).

In total, there are two specially serviced loans, representing 19.5% of the pool, and 15 loans on the servicer’s watchlist, representing 24.7% of the pool, as of the February 2021 remittance. The watchlisted loans are being monitored for various reasons, including a low debt service coverage ratio (DSCR) or occupancy figure, tenant rollover risk, and/or pandemic-related forbearance requests. As of the February 2021 remittance, the trust balance has been reduced by 28.1% to $918.5 million from the initial $1.3 billion, with 50 of the original 60 loans remaining in the pool. The transaction is concentrated by property type as 25 loans, representing 38.0% of the pool, are secured by retail properties and another eight loans, representing 28.7% of the pool, are secured by office properties. Additionally, there are eight loans that are fully defeased, which represents 29.4% of the pool.

The Milford Plaza Fee loan is a pari passu loan secured by the ground-leased fee interest under a hotel condominium of the Milford Plaza Hotel, located in the Times Square-Theater District neighborhood in New York City. The loan transferred to special servicing in June 2020 for imminent monetary default and, as of the February 2021 remittance, was most recently paid in April 2020. The special servicer is dual tracking foreclosure while continuing workout discussions with the borrower. As of an August 2020 appraisal, the collateral’s as-is value was estimated at $378.0 million, a slight reduction compared with the issuance appraised value of $386.0 million and well outside the whole loan balance of $275.0 million. As such, a significant loss at resolution is not anticipated despite the extended delinquency. To account for the increased risks in the outstanding defaults and the unknowns with regard to tourist traffic amid the Coronavirus Disease (COVID-19) pandemic for New York City, a probability of default (POD) penalty was applied to increase the expected loss for the loan in the analysis for this review.

The Apthorp Retail Condominium loan is secured by a retail component of The Apthorp, a 12-story, 161-unit luxury residential condominium located in Manhattan. The loan was placed on the servicer’s watchlist in November 2019 due to a low DSCR. As of the trailing 12 months ended September 2020, the DSCR was reported at 0.97 times (x), down from the YE2019 DSCR of 1.04x. The performance declines are a direct result of two top five tenants vacating their spaces ahead of lease expirations. As of the February 2021 remittance, the loan remains current and no relief request has been submitted by the sponsor to date. Given the property has operated below the 1.10x threshold since 2018 due to occupancy declines, with the prospects for backfilling the vacant space further diminished amid the pandemic, the loan was analyzed with a POD penalty to increase the expected loss for this review.

There is a top five loan in the transaction backed by a regional mall in Prospectus ID#4, Dartmouth Mall (6.2% of the pool), which is on the DBRS Morningstar Hotlist. The collateral property is a regional mall located in Dartmouth, Massachusetts, owned and operated by Pennsylvania Real Estate Trust (PREIT), which filed for bankruptcy in November 2020. PREIT emerged from bankruptcy protection shortly thereafter, in December 2020, and the subject loan, which was briefly in special servicing between June and September 2020, remains current and is not on the servicer’s watchlist as of the February 2021 reporting. While with the special servicer, the loan was modified to allow for a short-term relief period for the borrower, requested as a result of the ongoing coronavirus pandemic.

Although the mall lost a collateral anchor in Sears in 2019, a portion of the space was taken by Burlington Coat Factory (Burlington), which opened in the spring of 2020. More recently, PREIT confirmed in January 2021 that an Aldi grocery store will take another portion of the space, sharing a storefront with Burlington at the property’s eastern end. Remaining anchors include JCPenney, AMC Theaters, and a noncollateral Macy’s. The DSCR has been quite stable through the life of the loan, with the servicer most recently reporting a DSCR as of the Q3 2020 of 1.73x with a collateral occupancy rate of 97.0%. Although enclosed malls in secondary markets are among those that appear the most vulnerable to the effects of the pandemic, the ability of the sponsor to draw replacements for a vacant Sears does speak to the general desirability of the location and the nontraditional replacements in Burlington and Aldi suggest there may be repurposing opportunities that better fit the tastes and habits of today’s consumers.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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 reference 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#1 – Milford Plaza Fee (17.9% 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 (March 6, 2020), 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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@dbrsmorningstar.com.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

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