DBRS Morningstar Discontinues Credit Ratings on Two Classes and Confirms All Others of WFRBS Commercial Mortgage Trust 2013-C17

DBRS, Inc. (DBRS Morningstar) confirmed the credit ratings of the Commercial Mortgage Pass-Through Certificates, Series 2013-C17 issued by WFRBS Commercial Mortgage Trust 2013-C17 as follows:

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

All trends are Stable. DBRS Morningstar also discontinued the credit ratings for Classes A-S and X-A, as they were repaid in full as of the October 2023 remittance.

The confirmations reflect the continued performance and amortization of the pool, which remains in line with DBRS Morningstar’s expectations. Since the last credit rating action in November 2022, 44 loans have repaid from the trust, representing a collateral reduction of 80.7% since issuance. As of the October 2023 remittance, 28 loans remain outstanding, 13 of which (40.9% of the pool) are fully defeased. The majority of nondefeased loans are exhibiting strong credit metrics, as evidenced by the pool’s weighted-average debt service coverage ratio (DSCR) and debt yield of 2.19 times (x) and 15.5%, respectively. All loans are scheduled to mature in November 2023. DBRS Morningstar believes most of the outstanding loans will pay off as scheduled, contributing additional principal to the outstanding bonds in the near term.

Given the increased pool concentration, DBRS Morningstar based its credit ratings on a recoverability analysis of the remaining assets. There is only one loan in special servicing, Sierra Commons Shopping Center (Prospectus ID#13, 7.0% of the pool), which is secured by an anchored retail property in Palmdale, California. The property was 100% occupied as of June 2023 and reported a YE2022 DSCR of 1.56x, in line with 1.53x at YE2021 and up from 1.25x at issuance. The loan transferred to special servicing in September 2022 because of a nonmonetary default related to the borrower’s nonpermitted transfer of ownership interests and release of the original guarantors. Negotiations are ongoing regarding the borrower’s request to have the lender retroactively approve the equity transfer, and the loan has remained current on its debt service payments. Although the loan is in default, DBRS Morningstar does not anticipate a significant loss as evidenced by the stable performance metrics.

DBRS Morningstar has highlighted two other loans that are performing as of the October 2023 remittance but at increased risk of maturity default. Landerwood Crossing (Prospectus ID#25, 4.8% of the pool balance) is secured by a suburban office property approximately 13 miles east of downtown Cleveland. The property is fully occupied by three tenants as of the most recent reporting; however, the second- and third-largest tenants, which represent 56.1% of the net rentable area combined, have leases scheduled to roll over the next year. According to Reis, office space in the Chagrin Corridor/Solon submarket reported an average vacancy rate of 13.1% as of Q2 2023, a 50-basis-point increase from the prior quarter. The property’s upcoming rollover, softening submarket, and general uncertainty surrounding office could present refinance challenges for the borrower.

Baymont Hospitality Portfolio (Prospectus ID#41, 3.0% of the pool) is secured by three limited-service hotels in Kalamazoo and Battle Creek, Michigan. The underlying properties’ performance never restabilized following the effects of the Coronavirus Disease (COVID-19) pandemic, and the YE2022 reporting indicates the combined revenue is not sufficient to cover expenses, let alone debt service payments. According to servicer commentary, the borrower has submitted a request to extend the maturity date, indicating the loan is likely to be transferred to the special servicer in the coming months. As a mitigant to these concerns, the full balance of the subject loan as well as the two above-mentioned loans is fully contained to the unrated Class G certificate, illustrating the credit support provided to the rated bonds.

ENVIRONMENTAL, SOCIAL, AND 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).

Classes X-B 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 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 winding 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)

Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)

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].