DBRS Morningstar Confirms All Ratings on Citigroup Commercial Mortgage Trust 2013-GC15

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2013-GC15 issued by Citigroup Commercial Mortgage Trust 2013-GC15 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)
-- Class D at BB (sf)
-- Class X-C at B (sf)
-- Class E at B (low) (sf)
-- Class F at C (sf)

Classes D, E, and X-C continue to carry Negative trends. Class F has a rating that does not carry a trend. All other trends remain Stable. The Interest in Arrears designation was removed from Class F as part of this review.

DBRS Morningstar’s loss expectations remain in line with the prior review. The Negative trends are driven by select loans that are showing increased risk from issuance, as further detailed below. Although stress remains at the bottom of the bond stack, the classes carrying Stable trends benefit from increased credit support as a result of paydowns since issuance. The transaction originally consisted of 97 fixed-rate loans secured by 129 commercial and multifamily properties with a trust balance of $1.12 billion. As of the February 2022 remittance, 78 loans remain within the transaction with a trust balance of $698.8 million, reflecting collateral reduction of 37.3% since issuance. In addition, 15 loans, representing 14.2% of the pool, have defeased. Three loans, representing 7.4% of the pool, are in special servicing and 18 loans, representing 32.8% of the pool, are on the servicer’s watchlist. Losses to date total $3.15 million and have been contained to the nonrated Class G certificate.

The largest specially serviced loan and the largest contributor to DBRS Morningstar’s loss projections for the pool, 735 Sixth Avenue (Prospectus ID#6; 4.9% of the pool), is secured by the 16,500-square-foot (sf) ground and mezzanine floor retail portion of a 40-storey multifamily building in New York’s Chelsea neighbourhood. The departure of two major tenants from the property in 2018 drove occupancy down to approximately 18.8%, stressing cash flows and diminishing the borrower’s ability to cover debt service obligations. The special servicer filed for foreclosure in October 2019 and according to the most recent servicer commentary, a motion for summary judgement was granted in April 2021 with a foreclosure date expected to be established in the near term. Despite continuing with the foreclosure process, the lender has noted it will continue to explore all available options, including a note sale. A web search indicates 12,200 sf of net rentable area is available for lease at the subject property, implying a minimum vacancy rate of 73.9%. The collateral was last appraised in March 2020 at a value of $14.0 million, down 69.2% from the issuance value of $45.5 million. However, DBRS Morningstar notes that the as-is market value has likely declined since the last appraisal because of prolonged periods of low occupancy and depressed cash flows. Based on a haircut to the most recent valuation, DBRS Morningstar assumed a loss severity in excess of 90% at disposition for this loan.

The second-largest specially serviced loan, HGI Shreveport & HI Natchez (Prospectus ID#29; 1.3% of the pool) is secured by two limited-service hotels, Hilton Garden Inn Shreveport and the Hampton Inn and Suites Natchez, in Louisiana and Mississippi, respectively. The loan fell delinquent on payments in January 2019 and transferred to the special servicer in February 2020. The asset has been real estate owned since November 2020. The portfolio has underperformed since 2018, primarily as a result of subdued occupancy and weak submarket fundamentals. Performance has consistently lagged issuance expectations with the weighted-average debt service coverage ratio declining to 0.34 times (x) as of September 2021 from 1.69x at issuance. The servicer noted that construction related to deferred maintenance at the Natchez property is under way, and both properties will be marketed in an upcoming auction, set to take place in April 2022. A January 2022 appraisal valued the properties at $4.3 million, a decline from the April 2020 value of $7.8 million and the issuance value of $20.5 million, and below the current whole loan balance of $9.0 million. Based on the liquidation scenario assumed by DBRS Morningstar as part of this review, a loss severity approaching 80% is expected at disposition.

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

-- Prospectus ID#29 – HGI Shreveport & HI Natchez (1.3% 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 4, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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].

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