DBRS Morningstar Confirms All Credit Ratings of COMM 2013-CCRE11 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) confirmed its credit ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE11 issued by COMM 2013-CCRE11 Mortgage Trust as follows:

--Class C at AA (low) (sf)
--Class D at BBB (sf)
--Class E at BB (high) (sf)
--Class F at B (high) (sf)
--Class X-B at BBB (high) (sf)
--Class X-C at BB (low) (sf)

The trends for all Classes remain Stable. Since DBRS Morningstar’s last credit rating action, 39 loans have repaid from the pool, leaving the pool concentrated with only six loans outstanding. Two of the remaining six loans, representing 75.2% of the pool, are delinquent and in special servicing. DBRS Morningstar’s projected losses for these loans are currently contained to the unrated Class G certificate. DBRS Morningstar remains concerned with the timing of disposition of the outstanding loans and propensity for interest shortfalls. As of the September 2023 remittance, all classes received full interest payments.

The largest loan and primary driver of DBRS Morningstar’s loss projections is Oglethorpe Mall (Prospectus ID# 5, 55.5% of the pool), secured by approximately 627,000 square feet (sf) of a 943,000-sf regional mall in Savannah, Georgia. The loan sponsor is Brookfield Property Partners, and the mall is anchored by a noncollateral Belk, a collateral Macy’s (21.5% of the net rentable area (NRA); lease expiry in February 2028), and JCPenney (13.7% of the NRA; lease expiry in July 2027). A fourth anchor pad owned by Seritage Growth Properties has been dark since Sears vacated in 2018. Seritage is reportedly in talks with the city to rezone the site for multifamily use.

The loan transferred to special servicing in June 2023 for maturity default. Over the past year, occupancy has declined to 83.7% for the inline space, and 69.2% for the collateral overall. According to a June 2023 rent roll, leases representing 14.9% of the NRA have already expired or are scheduled to expire in the next 12 months. Prior to the Coronavirus Disease (COVID-19) pandemic, property revenues were largely consistent with the figures at issuance. Net cash flow hovered in the $11.4 million–$11.7 million range between 2020 and 2022, with debt service sufficiently covered. DBRS Morningstar expects this will decline given the drop in occupancy.

An updated appraisal has not yet been made available, but DBRS Morningstar expects the as-is value has likely declined significantly given the lower occupancy rate and the lower investor demand for regional malls, particularly those in secondary markets such as the subject. Based on similarly positioned regional malls for which updated appraisals have been received in the last few years, DBRS Morningstar estimated liquidation scenarios based on haircuts between 50% and 70% of the issuance value for the mall, with loss severities ranging between approximately 25% and 60%.

The second loan in special servicing is Parkview Tower (Prospectus ID#12, 19.8% of the pool), secured by an office property in King of Prussia, Pennsylvania. The loan was originally scheduled to mature in April 2023 but was granted an extension to September 2023. It transferred to special servicing in June 2023 after becoming delinquent on debt service payments. The June 2023 rent roll indicates occupancy has declined to 63% from 82% at YE2022, following the departure of the previous largest tenant, AmeriGas Propane, L.P. Additionally, the second-largest tenant, Leidos Inc. (10.0% of NRA), is expected to give back approximately half its space, and the third-largest tenant, Qualtek USA, LLC (9.6% of NRA), has an upcoming lease expiration in December 2023. In total, leases representing 27.7% of the NRA have already expired or are scheduled to expire in the next 12 months. According to Commercial Café, approximately 67,000 sf (30% of NRA) was listed as available for lease. No updated appraisal has been made available, but DBRS Morningstar expects the value has declined significantly given the low occupancy, soft submarket conditions, and upcoming rollover. For this review, DBRS Morningstar analyzed the loan with a liquidation scenario based on a stressed value, resulting in a loss severity in excess of 50.0%.

The remaining four loans were performing as expected as of the September 2023 remittance, overall. As of the most recent year-end reporting, these loans have a weighted-average (WA) debt yield of 9.0% and a WA debt service coverage ratio (DSCR) of 1.10 times (x). The WA DSCR is heavily weighted by one loan in particular, backed by a multifamily portfolio in Hartford, Connecticut. The loan has experienced cash flow declines as a result of a decrease in revenues and increased expenses. The loan was scheduled to mature in September 2023 but remains outstanding as of this press release. DBRS Morningstar will continue to monitor this pool as it continues to wind down.

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/416784 (July 4, 2023).

All credit ratings are subject to surveillance, which could result in credit 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 (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

DBRS Morningstar notes that a sensitivity analysis was not performed for this review as the transaction is in wind-down, with only a few loans remaining. In those cases, the DBRS Morningstar credit ratings are typically based on a recoverability analysis for the remaining loans.

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

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://www.dbrsmorningstar.com/research/420982)

North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008)

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].