DBRS Morningstar Confirms Ratings on All Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2013-C11

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2013-C11 issued by Morgan Stanley Bank of America Merrill Lynch Trust as follows:

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

The trends on Classes A-3, A-4, A-AB, X-A, and A-S are Stable. Classes B, C, D, E, F, and PST have ratings tthat do not typically carry trends in commercial mortgage-backed securities (CMBS) ratings.

DBRS Morningstar’s expectations for the pool remain in line with the last rating action in November 2022. All of the outstanding loans are scheduled to mature by August 2023. As of the January 2023 remittance, 27 of the original 38 loans remain in the pool. The initial pool balance of $856.3 million has been reduced by 44.9% to $472.3 million, which includes $45.5 million of realized trust losses stemming from the liquidation of Matrix Corporate Center in 2018. Since the last rating action, one loan, representing 3.1% of the pool balance, has defeased (a total of 13 loans are now defeased, now representing 32.0% of the pool) and two loans have fully repaid from the trust, accounting for $28.9 million in principal paydown. The barbelled ratings for this deal are reflective of the high credit support for the classes with investment grade ratings and the loss projections that DBRS Morningstar expects will erode the balances of the remaining classes upon resolution of the loans in special servicing, which combine for 36.7% of the transaction balance and include two of the three largest loans in the pool.

The largest loan in the pool, Westfield Countryside (Prospectus ID#1, 19.4% of the current pool), is secured by 464,398 square feet (sf) of a 1.3 million-sf regional mall in Clearwater, Florida. The loan transferred to special servicing in June 2020 for imminent default, following two months of closure because of Coronavirus Disease (COVID-19) restrictions. According to servicer commentary, the sponsor, Unibail-Rodamco-Westfield, cooperated in a friendly foreclosure process, a receiver was appointed in January 2021 and the special servicer began marketing the property for sale in January 2023. The most recent appraisal reported by the servicer, dated November 2021, valued the property at $92.3 million, which represents a 66.0% decline from the appraised value of $270.0 million at issuance. As of the September 2022 rent roll, the subject collateral was 72.1% occupied, down from 83.0% as of September 2021. The loan reported a year-end (YE) 2021 debt service coverage ratio (DSCR) of 1.01 times (x) compared with a YE 2020 DSCR of 1.09x. Both figures represent a significant decline from the DBRS Morningstar DSCR at issuance of 1.56x. DBRS Morningstar’s liquidation scenario for this loan was based on a haircut to the 2021 appraised value, with an analyzed loss severity approaching 60%.

The second-largest loan in the pool, The Mall at Tuttle Crossing (Prospectus ID#2, 17.4% of the current pool), is secured by a 385,057-sf portion of a 1.1 million-sf super-regional mall in Dublin, Ohio, a suburb of Columbus. The loan transferred to special servicing in June 2020 for imminent default, a receiver was appointed in January 2021, and the special servicer is expected to begin marketing the property for sale in the first quarter of 2023. The most recent appraisal reported by the servicer, dated August 2021, valued the property at $80.0 million, which is a decline of 66.7% from the appraised value of $240.0 million at issuance. As of the September 2022 reporting, collateral occupancy was 84.2%, an increase from the December 2021 rate of 76.0% and the September 2020 rate of 61.3%. The September 2022 DSCR was reported to be 0.85x compared with the year-end 2021 DSCR of 0.70x, both of which are a significant decline from the year-end 2020 DSCR of 1.44x and ultimately depressed from the issuance DSCR of 2.34x. DBRS Morningstar’s liquidation scenario for this loan was based on a haircut to the 2021 appraised value, with an analyzed loss severity in excess of 75%.

The largest loan on the servicer’s watchlist, Marriott Chicago River North Hotel (Prospectus ID#5, 9.0% of the current pool) is a pari passu loan secured by a 523-key hotel in Chicago. The property is dual-branded and consists of a 270-suite Residence Inn and a 253-suite SpringHill Suites. While the loan’s DSCR remains below break-even at 0.76x as of the September 2022 reporting, this is an increase from the YE2021 DSCR of 0.23x. The loan was previously in special servicing amid first year of the coronavirus pandemic, before returning to the master servicer in January 2022. During the time with the special servicer, two updated appraisals were obtained, the last of which showed an as-is value as of August 2021 of $123.5 million, down from $191 million at issuance but up from the November 2020 value of $84.1 million. The 2021 value implies a healthy loan-to-value ratio of 75.0% on the combined pari passu loan balance.

According to the most recent reporting for the trailing 12 months (T-12) ended September 30, 2022, the occupancy rate, average daily rate, and revenue per available room (RevPAR) were 69.5%, $186.05, and $129.21, respectively. Performance continues to lag when compared with pre-pandemic levels, as the T-12 ended March 31, 2020 RevPAR was $157.78; however, given the cushion implied by the 2021 valuation and the sponsor’s exhibited commitment to the loan through the decline in performance, DBRS Morningstar expects the sponsor will continue working to secure takeout financing for the 2023 maturity, even if a short to moderate term extension is required given the volatile lending environment.

DBRS Morningstar materially deviated from its North American CMBS Insight Model when determining the rating assigned to Class A-S, as the quantitative result suggested a lower rating on this class. The material deviation is warranted given the uncertain loan-level event risk.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit 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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Classes X-A and PST 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.

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

The principal methodology is North American CMBS Surveillance Methodology (October 3, 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.

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].

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429