DBRS Morningstar Confirms Ratings on Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9, Changes Trend for One Class to Negative From Stable

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on all 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-4 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 (sf)

With this review, DBRS Morningstar changed the trend on Class H to Negative from Stable. All other trends are Stable.

DBRS Morningstar downgraded the rating on Class H at the last review in November 2022 because of ongoing concerns with the largest loan in the pool, Milford Plaza Fee (Prospectus ID#1, 24.3% of the pool), which is in special servicing. With this review, DBRS Morningstar changed the trend on Class H to Negative considering the outlook surrounding the resolution of the loan has further deteriorated as a result of the prolonged workout period and the inability to complete a recent sale with an executed purchase agreement in place. Additional details are highlighted below. In addition, 90.8% of the pool have upcoming maturities or anticipated repayment dates in 2023, which will result in adverse selection loans that are unable to secure refinancing remaining in the trust.

As of the February 2023 remittance, 29 of the original 60 loans remain in the trust with an aggregate balance of $680.4 million, representing a collateral reduction of 46.7% from issuance. Since the November 2022 review, 16 loans were repaid, accounting for $135.9 million in principal paydown. Seven loans are defeased, representing 33.2% of the pool balance. The year-end (YE) 2021 weighted-average debt-service-coverage-ratio (DSCR) for the pool was 1.93 times (x), compared with the YE2020 DSCR of 2.63x.

The Milford Plaza Fee is the only loan in special servicing and it is secured by the ground-leased fee interest under a hotel condominium of The Milford Plaza Hotel, in the Times Square District neighborhood of Manhattan. The loan transferred to special servicing in June 2020 because of monetary default with debt service payments last remitted in April 2020. A foreclosure and appointment of a receiver was filed but a foreclosure sale has not been scheduled. The special servicer will continue to dual track foreclosure/receivership with other resolution strategies.

In October 2022, after surpassing the diligence period, a buyer opted not to go through with a proposed sale and assumption/modification submitted to the lender despite an executed purchase agreement. According to the servicer, the hotel tenant signed a sublease with NYC Health and Hospitals, encumbering the entire hotel, in October 2022 without obtaining prior consent from the lender or borrower. The tenant has not complied with terms of the subordination, non-disturbance and attornment agreement (SNDA) or the demand letter from the lender to remit cash flow. A January 2023 media report by the New York Post indicates the hotel is currently being used exclusively as an intake center and shelter for migrant families and was selected from proposals requested by the New York Mayor Eric Adams’ administration to house 600 asylum seekers as part of a “City Sanctuary Intake Facility.” The hotel previously benefited from a $300 million deal drafted by then New York Mayor Bill De Blasio’s administration to use hotels to house homeless during the height of the Coronavirus Disease (COVID-19) pandemic.

An August 2022 appraisal valued the property at $365.0 million, up from the July 2021 appraised value of $324.0 million, but down from the August 2020 appraised value of $378.0 million and the issuance appraised value of $386.0 million. Servicer advances continue to accrue, totaling $48.1 million as of February 2023, up from $41.1 million as of the last review, with loan exposure approaching a loan-to-value ratio of 100%. While the increase in appraised value is a positive development, the change in use of the hotel, the noncompliance of the hotel tenant to remit cash to the lender, and the unsuccessful sale of the subject remain concerns; as such, DBRS Morningstar applied a stressed haircut to the most recent appraisal value in its liquidation analysis, resulting in a loss severity in excess of 15.0%.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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 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.

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.

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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