KBRA Affirms All Ratings for GSMS 2013-GCJ14
6 Jun 2024 | New York
KBRA affirms all ratings of GSMS 2013-GCJ14, an $81.5 million CMBS conduit transaction. The affirmations reflect stability in our estimated losses for the remaining three assets since our last rating change in June 2021. All remaining loans maintain K-LOC designations, and all have estimated losses. Two loans are with the special servicer (65.8%) and one has been modified and extended (34.2%). In addition, the ratings reflect the likelihood of interest shortfalls reaching higher into the capital structure as the servicer works through the resolution of the assets. The details of the assets are outlined below.
Cranberry Woods Office Park (largest, 56.5%, K-LOC)
- The loan is collateralized by a 346,478 sf, Class-A suburban office complex located in Cranberry Township, Pennsylvania, approximately 21 miles north of the Pittsburgh CBD. The three, four-story collateral buildings were developed on a 33.6-acre site between 1999 and 2003.
- KBRA identified the loan as a K-LOC and maintains the KPO of Underperform based its foreclosure status with the special servicer. The loan transferred to the special servicer in August 2023 due to maturity default. The loan has experienced declining performance since the largest tenant, NetApp Inc., downsized to 35,733 sf from 85,503 sf in April 2022, reducing the occupancy in Building 800 to 56.0% as of December 2022. As of the December 2023 rent roll, Giant Eagle, Inc. has executed a lease for 107,033 sf bringing portfolio occupancy to 86.4%.
- The servicer-reported occupancies and DSCs are: 86.0% / 1.55x (FY 2023); 86.0% / 1.35x (FY 2022); at closing these were 99.0% / 1.45x. An appraisal dated November 2023 valued the asset at $53.0 million ($153 per sf), which is 28.9% below the $74.5 million ($215 per sf) value at issuance. KBRA’s analysis resulted in an estimated loss of $3.3 million (7.2% estimated loss severity).
Mall St. Matthews (2nd largest, 34.2%, K-LOC)
- The loan is collateralized by 670,376 sf of a 1.0 million sf, single-level regional mall located in Louisville, Kentucky, approximately seven miles east of the city’s CBD. The property, which is owned and operated by Brookfield Property Partners, has three anchors, Dillard’s, Dillard’s Men’s & Home, and JCPenney. Dillard’s owns its stores and the underlying land and JCPenney owns its improvements subject to a ground lease with the sponsor.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on a loan modification that was signed in March 2022 converting the loan to interest-only payments and extending its maturity until June 2025. The modification included a $7.0 million contribution of new capital from the borrower along with cash management going towards the reduction of the outstanding principal of the loan. The loan is also subject to a capital event waterfall that upon loan pay off would result in a minimum balance of $75.0 million to be repaid to the lender followed by additional capital event tiers between the lender and borrower.
- According to the September 2023 rent roll, the subject property was 91.2% leased compared to 94.0% at last review and 95.8% at closing. Tenant rollover risk remains a concern as lease rollover exceeds 10.0% of base rent in MTM/ 2024 (29.8%), 2026 (15.4%), 2027 (10.4%) and 2028 (14.5%). There are currently 32 tenants, representing 29.8% of base rent, on MTM leases or which have leases expiring in 2024. For the TTM period ending September 2023, comparable in-line tenants occupying less than 10,000 sf generated sales of $486 per sf, representing a 4.2% decline from last review ($507 per sf) and a 20.0% increase from securitization ($405 per sf).
- The servicer-reported occupancies and DSCs are: 94.0% / 1.51x (FY 2023); 93.0% / 1.59x (FY 2022); at closing these were 96.0% / 1.96x. An appraisal dated August 2021 valued the asset at $83.0 million ($124 per sf), which is 70.4% below the $280.0 million ($418 per sf) value at issuance. KBRA’s analysis resulted in an estimated loss of $53.1 million on a whole loan balance of $130.7 million (40.6% estimated loss severity).
Market Place Shopping Center (3rd largest, 9.3%, REO)
- The asset is collateralized by a 210,500 sf retail property in Fairview Heights, Illinois, located approximately 15 miles east of St. Louis, Missouri.
- KBRA maintains its K-LOC designation due to its REO status. The loan transferred in June 2020 to the special servicer and the collateral became REO in January 2023. The decline in performance is due to the tenant, Show Carnival (16,000 sf, 7.6%), going dark, as well as further reduced base rent and expense reimbursements from the remaining tenants.
- The servicer-reported occupancies and DSCs are: 80.0% / 1.18x (FY 2023); 79.0% / 1.59x (FY 2021); 79.0% / 0.87x (FY 2020); at closing these were 90.0% / 1.58x. An appraisal dated November 2023 valued the asset at $5.0 million ($24 per sf), which is 68.6% below the $16.0 million ($76 per sf) value at issuance. The loan was assigned an ARA of $3.6 million on January 9, 2024 and the cumulative ASER amount is $197,934. KBRA’s analysis resulted in an estimated loss of $2.9 million (38.8% estimated loss severity).
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.