KBRA Downgrades All Remaining Ratings for CGCMT 2013-GC17
2 Aug 2024 | New York
KBRA downgrades the ratings of the three outstanding classes of certificates for CGCMT 2013-GC17, a $65.0 million CMBS conduit transaction, which has two assets remaining in the underlying mortgage pool that have both transferred to the special servicer. The rating actions follow a review of the transaction, which reflects an increase in KBRA’s estimated losses compared to last review as well as the likelihood of interest shortfalls continuing and impacting all outstanding classes as the special servicer works through the resolution of the two remaining assets, which have both been deemed non-recoverable.
The largest remaining asset, One Union Square (76.9% of the pool balance), was determined by the special servicer to be non-recoverable during the July 2024 remittance period. The second-largest asset, Park Place Shopping Center (23.1%), is REO and received a non-recoverable determination during the January 2024 remittance period. Additional details for the trust’s two remaining assets are outlined below.
One Union Square (largest, 76.9%, K-LOC, Underperform, Foreclosure)
- The loan is collateralized by a six-story, 42,256 sf mixed-use office and retail property located in San Francisco, California with direct frontage on the Union Square public plaza.
- KBRA identifies the loan as a K-LOC and revises the loan’s KPO to Underperform from Perform due to its transfer to the special servicer following the loan's maturity default in October 2023. According to the June 2023 rent roll, the property was 87.2% leased; however, the property’s largest tenant, Bulgari (38.4% of total base rent, 54.1% of collateral sf) is expected to vacate at lease expiration in January 2025. Additionally, the property’s former third-largest tenant, WeWork (23.1% of collateral sf), rejected its lease through bankruptcy in November 2023. Adjusting for these two developments, collateral occupancy declines to 25.8%.
- An appraisal dated January 2024 valued the property at $63.4 million ($1,500 per sf), which is 42.4% below the $110.0 million ($2,603 per sf) appraisal value at issuance. The servicer-reported occupancies and DSCs are: 87.0% / 2.33x (YTD June 2023), 87.0% / 2.07x (FY 2022); at issuance these were 98.7% / 1.74x. KBRA’s analysis resulted in an estimated loss of $11.3 million (22.5% estimated loss severity) on the $50.0 million loan balance.
Park Place Shopping Center (2nd largest, 23.1%, K-LOC, Underperform, REO)
- The asset is a 150,766 sf retail center with a vacant former grocery anchor located in Vallejo, California, approximately 26 miles northeast of San Francisco. According to servicer commentary, the primary retail buildings, with the exception of certain net-lease outparcels are likely to be redeveloped.
- KBRA maintains the asset’s K-LOC designation and KPO of Underperform due to its REO status. The asset transferred to the special servicer in June 2020 due to imminent default related to a tenant bankruptcy and the trust acquired title to the asset in February 2021. According to the April 2024 rent roll, the property was 23.0% leased. Servicer commentary indicated the property was under contract with a 45-day due diligence period for a prospective buyer with additional time allocated for closing.
- An appraisal dated April 2024 valued the property at $9.3 million ($62 per sf), which is 39.1% below the $23.8 million ($158 per sf) appraisal value at issuance. The asset carries an ARA of $9.8 million, resulting in a cumulative ASER of $562,000. The asset has also been deemed non-recoverable with cumulative non-recoverable interest totaling $442,766 as of the July 2024 remittance period. The servicer-reported occupancies and DSCs are: 25.0% / -0.01x (FY 2023), 33.0% / 0.38x (FY 2022); at issuance these were 93.3% / 1.59x. KBRA’s analysis resulted in an estimated loss of $8.8 million (49.7% estimated loss severity) on the $15.0 million loan balance.
Details concerning the classes with ratings changes are as follows:
- Class D to B- (sf) from BBB- (sf)
- Class E to CCC (sf) from BB (sf)
- Class F to CC (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 continuing magnitude and extent of interest shortfalls on the certificates.
To access rating and relevant documents, click here.