KBRA Downgrades Three Ratings and Affirms All Other Ratings for WFRBS 2013-C15
8 Apr 2024 | New York
KBRA downgrades the ratings of three classes of certificates and affirms all other outstanding ratings of WFRBS 2013-C15, a $258.9 million CMBS conduit transaction. The downgrades are driven by an increase in KBRA's estimated losses for three (97.6% of the pool balance) assets, all of which have been identified as K-LOCs. In addition, the ratings considered the likelihood of an increase in interest shortfalls reaching higher in the capital structure as the servicer works through the resolution of the remaining assets. All three K-LOCs are specially serviced, including one performing matured balloon (42.5%), one non-performing matured balloon (27.7%), and one (27.4%) REO asset. The details of the K-LOCs are outlined below.
Augusta Mall (largest, 42.5%, K-LOC, Underperform, Performing Matured Balloon)
- The loan is collateralized by a 500,222 sf portion of a 1.1 million sf regional mall located in Augusta, Georgia, approximately 150 miles east of Atlanta. Mall anchors include Dick's Sporting Goods, Dillard’s, JCPenney, and Macy’s, all of which own their respective improvements and land with the exception of Dick's, which occupies its space subject to a lease expiring in January 2028. Sears previously served as a non-collateral anchor but closed its store at the subject property in April 2020. The former Sears space remains vacant. The loan sponsor is Brookfield Property Partners L.P.
- KBRA maintains the loan’s K-LOC designation and its KPO of Underperform due to its maturity default and performing matured balloon status. The loan was transferred to the special servicer for maturity default during the August 2023 remittance period and a pre-negotiation agreement was executed. The special servicer is dual-tracking modification and foreclosure strategies.
- For the FY 2023 period, comparable in-line tenants with less than 10,000 sf (excluding Apple) generated sales of $458 per sf, representing a 12.8% increase from issuance ($406 per sf). The servicer-reported occupancies and DSCs are: 90.0% / 3.10x (YTD March 2023), 90.0% / 3.44x (FY 2022); at closing these were 98.0% / 2.25x. KBRA’s analysis resulted in an estimated loss of $53.5 million (31.5% estimated loss severity) on the whole loan balance of $170.0 million.
Carolina Place (2nd largest, 27.7%, K-LOC, Underperform, Non-Performing Matured Balloon)
- The loan is collateralized by a 647,511 sf portion of a 1.2 million sf super-regional mall located in Pineville, North Carolina, approximately ten miles south of the Charlotte CBD. The mall is currently anchored by Belk, Dillard's, and JCPenney, of which only JCPenney is collateral for the loan. JCPenney occupies its space subject to a lease expiring in May 2028. Since last review, the previously vacant Sears store, which is loan collateral, was leased to Southern Lion, a home décor market with over 100 tenants. The mall was also previously anchored by Macy's, which sold its store to the loan sponsor in 2017. The former Macy's store was subsequently leased to Dick's Sporting Goods. The loan sponsor is Brookfield Property Partners L.P.
- KBRA maintains the loan’s K-LOC designation and its KPO of Underperform due to its maturity default and non-performing matured balloon status. The loan was transferred to the special servicer for maturity default during the June 2023 remittance period. In January 2024, the special servicer and borrower executed a forbearance agreement that expires in June 2025.
- For the TTM period ended June 2023, comparable in-line tenants with less than 10,000 sf generated sales of $476 per sf, representing a 15.8% increase from issuance ($411 per sf). For the same period, JCPenney reported sales of $55 per sf, a 64.9% decrease from issuance ($157 per sf).
- The servicer-reported occupancies and DSCs are: 97.0% / 1.47x (YTD September 2023), 75.0% / 1.48x (FY 2022); at closing these were 94.0% / 1.71x. An appraisal dated July 2023 valued the property at $135.0 million ($208 per sf), which is 48.7% below the $263.0 million ($406 per sf) value at issuance. KBRA’s analysis resulted in an estimated loss of $49.1 million (33.3% estimated loss severity) on the whole loan balance of $147.8 million.
Kitsap Mall (3rd largest, 27.4%, K-LOC, Underperform, REO)
- The asset is a 533,480 sf portion of a 715,225 sf regional mall located in Silverdale, Washington, approximately 18 miles west of Seattle. The property is anchored by JCPenney, Kohl's, Macy’s, and a WinCo grocery store. JCPenney owns its improvements subject to a ground lease with the borrower that expires in August 2028 while Macy’s is loan collateral, operating subject to a lease expiring in March 2029. Neither Kohl's nor WinCo improvements and underlying land are loan collateral.
- KBRA maintains the asset’s K-LOC designation and its KPO of Underperform due to its REO status. The loan was transferred to the special servicer in May 2020 for imminent default and a receiver was appointed in August 2020 after several years of declining cash flow performance. The title was conveyed to the trust in December 2021 and the special servicer is focused on stabilizing the asset by improving in-line tenant performance. Updated sales data was not provided. The loan sponsor was Starwood Retail Partners and JLL, the receiver, is currently managing the mall.
- The servicer-reported occupancies and DSCs are: 97.0% / 0.77x (FY 2023), 96.0% / 0.81x (FY 2022); at closing these were 92.0% / 1.70x. An appraisal dated August 2023 valued the property at $32.4 million ($61 per sf), which is 70.8% below the $111.0 million ($208 per sf) value at issuance. As a result, the asset carries an ARA of $40.7 million, resulting in a cumulative ASER of $5.3 million. KBRA’s analysis resulted in an estimated loss of $51.4 million (72.4% estimated loss severity) based on the loan balance of $71.0 million.
Details concerning the classes with ratings changes are as follows:
- Class B to BBB (sf) from A- (sf)
- Class PEX to B- (sf) from BB (sf)
- Class C to B- (sf) from BB (sf)
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as, the magnitude and extent of interest shortfalls, if any, on the certificates.
To access rating and relevant documents, click here.