DBRS Morningstar Downgrades Four Classes of Citigroup Commercial Mortgage Trust 2013-GC15

DBRS Limited (DBRS Morningstar) downgraded the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2013-GC15 issued by Citigroup Commercial Mortgage Trust 2013-GC15 as follows:

-- Class D to BB (sf) from BBB (low) (sf)
-- Class X-C to B from BB (high) (sf)
-- Class E to B (low) (sf) from BB (sf)
-- Class F to C (sf) from B (high) (sf)

With this review, DBRS Morningstar removed Class F from Under Review with Negative Implications, where it was placed on August 6, 2020.

In addition, DBRS Morningstar confirmed the remaining classes 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 C at A (sf)
-- Class PEZ at A (sf)

Additionally, DBRS Morningstar changed the trends on Classes D, E, and X-C to Negative from Stable. Class F has a rating that does not carry a trend. All other remain are Stable.

The downgrades and Negative trends are largely the result of a sizable loss for one loan that reduced credit support for the lowest rated bonds, as further discussed below, and the increased risk of loss to the trust for some of the loans in the pool, particularly the two largest loans in special servicing as further discussed below.

As of the March 2021 remittance, 78 of the original 97 loans remain in the pool, representing a collateral reduction of 35.9% since issuance. In addition, 12 loans, representing 12.0% of the current pool balance, are fully defeased. Additionally, there are 15 loans, representing 27.5% of the current trust balance, on the servicer’s watchlist as of the March 2021 remittance. The servicer is monitoring these loans for a variety of reasons, including low debt service coverage ratio (DSCR) and occupancy issues; however, the primary reason for the increase of loans on the watchlist is the Coronavirus Disease (COVID-19)-driven stress for retail and mixed-use properties, with watchlisted loans backed by those property types generally reporting a low DSCR.

As of the March 2021 remittance, the pool has five loans, representing 11.4% of the pool in special servicing, including 735 Sixth Avenue (Prospectus ID#6; 4.7% of the pool), Walpole Shopping Mall loan (Prospectus ID#20, 2.3% of the pool), HGI Shreveport & HI Natchez (Prospectus ID#29; 1.7% of the pool), HGI Victorville (Prospectus ID#38; 1.4% of the pool), and O’Malley Square (Prospectus ID#41; 1.3% of the pool).

The largest loan in special servicing, 735 Sixth Avenue (Prospectus ID#6; 4.7% of the pool), is secured by the ground- and mezzanine-floor retail portion of a 40-story multifamily building in New York’s Chelsea neighborhood. The property has struggled since the loss of David’s Bridal (65.5% of the net rentable area (NRA)) and T-Mobile (15.2% of the NRA), which vacated the property at their respective lease expirations in late 2018, driving occupancy down to approximately 18.8%. The loan ultimately transferred to special servicing in February 2019 and a foreclosure was filed in October 2019. After the loss of the two major tenants, the DSCR dropped to approximately 0.40 times. Because of the building’s restrictions on restaurant tenants, the property has had issues backfilling the space, despite its central location in Manhattan.

The remaining tenants include Oasis Nails & Spa (9.1% of the NRA through November 2028) and Gourmet Bay Spirits (6.1% of the NRA expired August 2020). A March 2020 appraisal estimated an as-is value of $14.0 million, down 69.2% from the $45.5 million value at issuance. However, given the increased stressed for retail space in New York City amid the pandemic, it is quite possible the value has fallen even further since the March 2020 appraisal date. As such, DBRS Morningstar assumed a significant haircut to the as-is value in the liquidation scenario applied to this loan in the analysis for this review, resulting in a loss severity in excess of 80%.
The second-largest specially serviced loan is the Walpole Shopping Mall loan (Prospectus ID#20, 2.3% of the pool), which is secured by a 397,971 square foot (sf) anchored retail center in Walpole, Massachusetts, about 20 miles outside of downtown Boston. The loan is a $16.5 million pari passu participation in a $60.9 million senior loan and was transferred to the special servicer in May 2020 due to a coronavirus relief request. Occupancy at the property dropped to 89% after Office Max, formerly the third-largest tenant, vacated at its lease expiration in January 2020. A 2020 appraisal valued the property at $50.9 million, which is about $10.0 million below the senior loan balance, and DBRS Morningstar assumed a loss in this analysis.

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

DBRS Morningstar provides issuance metrics and all historical surveillance commentary on the DBRS Viewpoint platform.

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 [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.

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 [email protected].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577