Morningstar DBRS Confirms All Credit Ratings on COMM 2013-CCRE11 Mortgage Trust, Changes Trends to Negative from Stable

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

-- 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)

Morningstar DBRS also changed the trends on all classes to Negative from Stable.

The trend change is driven by increased propensity for interest shortfalls. Since the last credit rating action, two loans have repaid from the pool. There has been no resolution for two loans in special servicing, Oglethorpe Mall (Prospectus ID#5, 59.6% of the pool) and Parkview Tower (Prospectus ID#12, 21.1% of the pool), and one additional loan has defaulted and transferred to special servicing. There are now four loans remaining in the pool, three of which are in maturity default, and Morningstar DBRS remains concerned regarding the pool's increased concentration and timeline for disposition.

To reflect this concentration, Morningstar DBRS' analysis considered a recoverability analysis which determined that losses associated with the defaulted loans are likely to be contained to the unrated Class G bond. However, Morningstar DBRS' ratings are constrained by the expectation for timely interest. Although all Morningstar DBRS rated bonds are currently receiving interest as of the September 2024 remittance, interest continues to accrue on the unrated Class G bond, which hasn't received full interest in over a year. Morningstar DBRS notes the increased propensity for unpaid interest to rated bonds should Oglethorpe Mall, which remains current on debt service payments as of this press release, become delinquent and/or loans remain unresolved in special servicing.

The largest loan and primary driver of Morningstar DBRS' loss projections is Oglethorpe Mall, 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. Since the transfer, physical occupancy has declined to 82.3% for the inline space and 69.2% for the collateral overall. According to a June 2024 rent roll, leases representing 19.6% of the NRA have already expired or are scheduled to expire by YE2025. An April 2024 appraisal valued the property at $128.8 million, down from an issuance appraised value of $236.5 million. The special servicer is dual tracking foreclosure and modification as the workout strategy, and although the loan is past its maturity date, the loan is reported as paid through August 2024. Morningstar DBRS' liquidation scenario for this loan considered a stress to the most recent appraised value, resulting in a projected loss severity of approximately 30%.

The second loan in special servicing is Parkview Tower (Prospectus ID#12, 21.1% 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. An updated rent roll has not been received; however, Morningstar DBRS expected that occupancy was likely to decline from the June 2023 figure of 63% given the announced downsizing and departure of several tenants. The special servicer commentary indicates occupancy dropped to 51.4% as of May 2024. An appraisal dated February 2024 valued the property at $23.7 million, down from the issuance appraised value of $47.0 million. Morningstar DBRS' liquidation scenario for this loan results in a projected loss severity approaching 50%.

The smallest loan in special servicing is Hartford Gardens Portfolio (Prospectus ID#18, 10.2% of the pool). The loan is backed by 204 Class C multifamily units across three properties in Hartford, Connecticut. The loan was previously on the servicer's watchlist for a low debt service coverage ratio (DSCR) and delinquent real estate taxes and transferred to special servicing in September 2023 for maturity default. The borrower has signed a pre-negotiation agreement, and the special servicer is pursuing receivership while considering a modification. An updated appraisal has not been finalized, but Morningstar DBRS expects the portfolio's value has declined since issuance. The smallest and only non-defaulted loan in the pool is backed by a single-tenant retail property, with a restaurant leasing 100% of the NRA on a lease through March 2029. The loan was originally scheduled to mature in October 2023 and granted a three-year extension. The loan continues to perform in accordance with the modification terms.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781).

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 Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798).

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

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.

Morningstar DBRS 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.

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

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

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://dbrs.morningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0 (https://dbrs.morningstar.com/research/428797)

Rating North American CMBS Interest-Only Certificates (June 28, 2024; https://dbrs.morningstar.com/research/435294)

Morningstar DBRS Commercial Real Estate Property Analysis Criteria (September 19, 2024; https://dbrs.morningstar.com/research/439702/morningstar-dbrs-north-american-commercial-real-estate-property-analysis-criteria)

North American Commercial Mortgage Servicer Rankings (August 23, 2024; https://dbrs.morningstar.com/research/438283/north-american-commercial-mortgage-servicer-rankings)

Legal Criteria for U.S. Structured Finance (April 15, 2024; https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance)

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.