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)

All trends are Stable, with the exception of Class F, which is assigned a rating that generally does not carry a trend.

The rating confirmations and Stable trends reflect the relatively stable performance of the pool since the last rating action, including the repayment of the previously specially serviced loan and additional defeasance.

As of the March 2023 remittance, 77 of the original 97 loans remain in the pool, with an aggregate principal balance of $673.3 million, reflecting a collateral reduction of 39.6% since issuance as a result of loan repayments and scheduled amortization. Since the last rating action, one loan previously in special servicing, HGI Shreveport & HI Natchez (Prospectus ID#29; previously 1.3% of the pool), was liquidated from the pool with a minimal loss that has been contained to the unrated Class G certificate. In addition, four loans have been fully defeased, bringing the total defeasance to 31 loans, representing 29.7% of the pool. As of the March 2023 reporting, there are two loans, representing 6.6% of the pool, in special servicing and 43 loans, representing 63.9% of the pool, on the servicer’s watchlist, the majority of which are being monitored for upcoming maturities. All of the outstanding loans are scheduled to mature in 2023. Of the nondefeased, nonspecially serviced loans maturing this year, the weighted-average debt yield and debt service coverage ratio (DSCR) are reported to be 11.33% and 1.62 times (x), respectively. DBRS Morningstar expects the majority of outstanding loans will fully repay from the pool based on these metrics.

The largest specially serviced loan, 735 Sixth Avenue (Prospectus ID#6; representing 4.9% of the pool), is secured by the 16,500-square-foot (sf) ground and mezzanine floor retail portion of a 40-story, multifamily building in the Chelsea neighborhood of Manhattan. The loan transferred to special servicing in March 2019 for payment default. Occupancy declined drastically as a result of two major tenants, David’s Bridal (previously 65.5% of net rentable area (NRA)) and T-Mobile (previously 15.2% of NRA), vacating the property at lease expiration in October 2018 and November 2018, respectively. The departure of these two tenants resulted in occupancy decreasing to 18.8%. The special servicer is reportedly dual tracking a loan modification and foreclosure of the asset. The most recent appraisal, dated January 2023, reported an as-is value of $16.2 million, down 64.4% from the issuance value of $45.5 million. In its analysis, DBRS Morningstar liquated the loan, resulting in a loss severity exceeding 85.0%.

Though not in special servicing, DBRS Morningstar is also monitoring the third-largest loan, SkySong Center (Prospectus ID#5; representing 6.4% of the pool). It is secured by two Class A suburban office buildings in Scottsdale, Arizona. The loan was added to the servicer’s watchlist in September 2022 for decreasing occupancy. As of September 2022, the property was 74.2% occupied, down from 96.1% at YE2021. The occupancy decline is a result of multiple tenants, including Ticketmaster, LLC (Ticketmaster; previously 25.0% of NRA) and The Northwestern Mutual Life Insurance Company (Northwestern; previously 5.8% of NRA), vacating at lease expiration, and Nuvei Technologies, downsizing to 15,000 sf (approximately 5.0% of NRA) from 26,500 sf (approximately 9.1% of NRA). Additionally, within the next 12 months, 8.0% of NRA is scheduled to roll. The annualized net cash flow for the trailing nine-month period ended September 30, 2022, was $5.6 million, reflective of a DSCR of 1.85x, down from $6.0 million at YE2021 (1.97x).

While the property has experienced decreased cash flow as a result of rollover, there has been some leasing activity at the property. The borrower is working with a prospective tenant to backfill Ticketmaster’s former space, with plans to divide it into smaller units. Additionally, U.S. Xpress, Inc. backfilled the space previously occupied by Northwestern and on a lease through June 2024, and the servicer reported the borrower is in discussion with several other prospective tenants. The loan is scheduled to mature in September 2023, and the servicer has reached out for an update from the borrower regarding their payoff plans. While the property is well located, attracted recent leasing interest, and, prior to the most recent dip, has exhibited stable historical performance, submarket vacancy suggests backfilling empty space at the property may be challenging, especially in light of changing trends with regards to office use. DBRS Morningstar’s analysis includes an elevated probability of default to reflect occupancy concerns.

DBRS Morningstar ran an updated model given the meaningful changes since last review. Material deviations from the North American CMBS Insight Model were reported for Class E, as the quantitative results suggested higher ratings. The material deviations were warranted given the uncertain loan-level event risk with the increase in defeasance, and the loan’s on the servicer’s watchlist and in special servicing.

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 (May 17, 2022).

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.

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

The principal methodology is North American CMBS Surveillance Methodology (October 3, 2022), which was recently updated on March 16, 2023 (the updates were deemed to be not material) and 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 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.

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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