KBRA Downgrades One Rating and Affirms the Other Outstanding Rating for MSBAM 2013-C13
10 Oct 2024 | New York
KBRA downgrades one rating and affirms the other outstanding rating for MSBAM 2013-C13, a $49.6 million CMBS conduit transaction, which has four assets remaining in the underlying mortgage pool, three of which have been identified as K-LOCs (86.1% of the pool balance). The rating actions follow a surveillance review of the transaction, which has exhibited an increase in KBRA's estimated losses compared to KBRA's last review as well as the likelihood of an increase in interest shortfalls as the servicer works through the resolution of the three K-LOCs.
As of the September 2024 remittance period, there are three specially serviced assets (86.1%), of which one (26.8%) is REO, and the remaining two (59.3%) are in foreclosure. All three of the specially serviced assets were identified as K-LOCs with estimated losses. The details of the remaining assets are outlined below.
940 Ridgebrook Road (largest, 44.3%, K-LOC, Underperform, Foreclosure)
- The loan is collateralized by a 210,002 sf, Class-A office building located in Sparks Glencoe, Maryland, approximately 20 miles north of the Baltimore CBD.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform based on the loan's foreclosure status with the special servicer and occupancy concerns. The loan was transferred to the special servicer in December 2023 due to a maturity default after the borrower failed to make the balloon payment by the December 2023 maturity date. The property was originally leased in its entirety to Element Fleet Management, a wholly-owned subsidiary of Ocwen Financial Corporation, pursuant to a triple-net lease which expired in February 2024. Per special servicer commentary, the tenant vacated at its lease expiration and the property is currently 100% vacant. Furthermore, the servicer indicates that the borrower is no longer willing to contribute equity to the property. A PNL has been signed and counsel has been engaged. The lender is dual tracking with the foreclosure process and exploring a possible receiver sale.
- An appraisal dated April 2024 valued the property at $9.5 million ($45 per sf), representing a 75.5% decrease from the $38.7 million ($184 per sf) value at securitization. As a result, the asset carries an ARA of $8.8 million. As of the September 2024 remittance, outstanding P&I advances totaled $733,603 and cumulative servicer advances of $180,451. KBRA's analysis resulted in an estimated loss of $14.0 million (63.8% estimated loss severity) on a loan balance of $22.0 million.
1200 Howard Blvd. (2nd largest, 26.8%, K-LOC, Underperform, REO)
- The asset is an 87,011 sf, Class-A suburban office property located in Mount Laurel, New Jersey, approximately 12 miles east of the Philadelphia CBD.
- KBRA maintains the asset's K-LOC designation based on its REO status. The loan was transferred to the special servicer in April 2018, as a result of the borrower completing an equity transfer that was not permitted under the loan documents, as well as a change in the property management company without the lender's consent. The borrower subsequently failed to pay off the loan at its December 2018 maturity date. The trust acquired title to the property in November 2021 via a foreclosure sale. Per servicer commentary, the property failed to sell during a December 2022 auction, and a sale is anticipated in the first quarter of 2025. Since last review, the most recent rent roll dated July 2024 confirms the largest tenant, Merrill Lynch (38.1% of base rent) has renewed its lease through February 2028. Additionally, lease rollover through 2025 represents 53.7% of total base rent and 49.2% of total square footage with the earliest lease expiring in December 2024 (32.8% of base rent).
- The servicer-reported occupancies and DSCs are: 86.0% / 1.03x (FY 2023), 93.0% / 1.41x (FY 2022); at closing, these were 82.0% / 1.28x. An appraisal dated December 2023 valued the property at $12.6 million ($145 per sf), a 47.7% decrease from $24.1 million ($277 per sf) value at issuance. As a result, the asset carries an ARA of $5.2 million, resulting in a cumulative ASER of $895,602. As of the September 2024 remittance, outstanding P&I advances totaled $602,616. KBRA's analysis resulted in an estimated loss of $10.8 million (81.4% estimated loss severity) on a loan balance of $13.3 million.
Burnham Park Professional Center (3rd largest, 15.0%, K-LOC, Underperform, Foreclosure)
- The loan is collateralized by a 74,464 sf mixed-use (retail/office) property in Chicago, Illinois.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform based primarily on its status with the special servicer and its failure to payoff by its maturity date in September 2023. Per servicer commentary, the lender has filed for foreclosure and a receiver was appointed in May 2024. In addition, there are occupancy and lease rollover concerns. According to the November 2023 rent roll, the property was 63.9% leased, down from 89.5% for YE 2022 and 100% at issuance. Lease rollover through 2025, inclusive of MTM tenants, represent 41.5% of base rent and 35.3% of total collateral square footage, and includes the largest tenant, Landmark Education (36.2% of total base rent, 19.4% of total collateral square footage). In addition, according to REIS, total office vacancy for the Southwest submarket was approximately 18.0% and total retail vacancy for Central submarket was 18.8%.
- The servicer-reported occupancies and DSCs are: 64.0% / 1.30x (FY 2023), 90.0% / 1.89x (FY 2022); at closing, these were 100% / 1.42x. An appraisal dated June 2024 valued the property at $4.8 million ($64 per sf), representing a 61.0% decrease from the $12.3 million ($165 per sf) value at issuance. As a result, the asset carries an ARA of $3.7 million, resulting in a cumulative ASER of $75,849. As of the September 2024 remittance, outstanding P&I advances totaled $421,480. KBRA's analysis resulted in an estimated loss of $4.8 million (64.8% estimated loss severity) on a loan balance of $7.2 million.
13017-13045 Ventura Boulevard (4th largest, 14.0%, Perform)
- The loan is collateralized by a 20,620 sf retail property in Studio City, California. The properties were built between 1936 and 1964. The loan matures in December 2028.
- KBRA maintains the loan's KPO of Perform based on continued stable financial performance and occupancy. As of the March 2024 rent roll, the property was 75.6% leased, in line with FY 2023 (75.6%), however down from 88.1% at issuance. Lease rollover through 2025, inclusive of MTM tenants, represent 41.7% of total base rent and 33.2% of total collateral square footage.
- The servicer-reported occupancies and DSCs are: 75.6% / 1.79x (TTM March 2024), 76.0% / 1.68x (FY 2023); at closing, these were 85.0% / 1.39x.
Details concerning the rating downgrade:
- Class G to B- (sf) from B+ (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.