Press Release|CMBS
KBRA Affirms All Ratings for WFRBS 2013-C16
6 Nov 2024 | New York
KBRA affirms all of its outstanding ratings for WFRBS 2013-C16, a $81.5 million CMBS conduit transaction. The affirmations follow a surveillance review of the transaction which has four remaining loans. Since last review, the largest remaining loan, Augusta Mall (72.3% of the pool balance) was modified and extended to August 2025 and the second largest, West Mall Office Park (12.9%) became REO. Of the other two remaining loans, both are also K-LOCs, one of which is (8.1%) matured performing and the other is (6.7%) a matured non-performing loan. The details of the assets are outlined below.
Augusta Mall (largest, 72.3%, K-LOC, Underperform, Matured Performing)
- 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 subsequent extension. The loan was transferred to the special servicer for maturity default during the August 2023 remittance period. A Loan Extension and Modification Agreement was executed September 2024 extending the loan's maturity through August 2025, with one option to further extend through August 2026, provided the property achieved a DSC of at least 1.50x. Additionally, an all-purpose reserve was established with all excess cash flow going in up to a cap of $2.0 million, and any excess cash over the cap will be applied to the principal balance. The reserve will be for tenant improvements, leasing commissions, capex and for shortfalls.
- For the TTM March 2024 period, comparable in-line tenants with less than 10,000 sf (excluding Apple) generated sales of $454 per sf, in line with FY 2023 ($458 per sf), and representing a 11.8% increase from issuance ($406 per sf). An appraisal dated April 2024 valued the property at $159.6 million ($319 per sf), which is 36.2% lower than the $250.0 million ($500 per sf) at issuance. The servicer-reported occupancies and DSCs are: 91.0% / 3.20x (FY 2023), 90.0% / 3.44x (FY 2022); at closing these were 98.0% / 2.25x. KBRA’s analysis resulted in an estimated loss of $47.7 million (28.6% estimated loss severity) on the whole loan balance of $167.0 million based on a value of $119.0 million ($238 per sf) which considers a distress liquidation value of the property.
West Mall Office Park (2nd largest, 12.9%, K-LOC, Underperform, REO)
- The asset is a three-building office park totaling 198,946 sf located in Albany, New York. The complex was built in 1966 and last renovated in 2008. Loan matured in September 2023.
- 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 April 2022 for imminent monetary default. Per the special servicer, the borrower requested the transfer due to COVID-19 disruptions, and the borrower had indicated plans to work with the lender to transition the property to the lender, and a receivership order was entered in August 2022. Property became REO in January 2024. Per servicer commentary, the special servicer is evaluating leasing opportunities to stabilize the property closer to 80.0%, positioning the asset for an expected disposition by June 2025.
- According to the July 2024 rent roll, the property is 70.0% leased, up from 65.4% at last review. Since last review, two new tenants have executed leases (8.9% of total base rent, 6.2% of total sf), and the second largest tenant, Mildred Elley (22.4%, 18.8%) renewed its lease through September 2026, which was scheduled to expire in June 2024. The fifth largest tenant from last review, St Peters Hospital (2.5% of total sf) vacated at its lease expiration in April 2024. Lease rollover is minimal through 2025, however 55.4% of total base rent is scheduled to expire in 2026 and includes the two largest tenants (53.1%).
- The servicer-reported occupancies and DSCs are: 66.5% / -0.19x (YTD March 2024), 66.5% / 0.09x (FY 2023), 70.8% / -0.63x (FY 2022); at closing, these were 87.4% / 1.48x. An appraisal dated April 2024 valued the property at $9.5 million ($48 per sf), which is 46.0% below the $17.5 million ($88 per sf) value at issuance. As a result, the asset carries an ARA of $2.1 million, resulting in a cumulative ASER of $95,555. As of the October 2024 remittance, cumulative P&I advances totaled 587,115. KBRA’s analysis resulted in an estimated loss of $6.0 million (56.9% estimated loss severity) on the loan balance of $10.5 million based on a value of $5.9 million ($30 per sf) which considers a distress liquidation value of the property.
Raleigh Office Portfolio (3rd largest, 8.1%, K-LOC, Underperform, Matured Performing)
- The loan is collateralized by two office properties consisting of 138,393 sf, located in Raleigh, North Carolina. Centerview III was constructed in 1999 and is a three-story building, located approximately seven miles east of Raleigh and Brook Forest I was constructed in 2000, a three-story building located approximately seven miles north of Raleigh. Loan matured in September 2023.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform due to its maturity default in September 2023. The loan was transferred to the special servicer in July 2023, after the former largest tenant, TereData Operations, that accounted for 11.6% of the total collateral square footage and 16.6% of total base rent, vacated. Additionally, Progressive Casualty Insurance Company (largest, 11.7% of total square footage; 18.0% of total base rent), which had an initial lease expiration in July 2022, had extended their lease for one year through July 2023. Per KBRA research, the tenant is still in-place at the collateral property. As of the December 2023 rent roll, the property is 63.7% leased, in line with last review, and down from 87.7% at issuance. Lease rollover through 2025, inclusive of MTM leases, represents 37.2% of total base rent and is spread across four leases, including the largest tenant (18.0%).
- A forbearance agreement was executed in January 2024 allowing a forbearance period until September 1, 2025, with the option to request an extension of an additional 12 months through September 2026 when meeting certain agreed upon conditions further outlined in the agreement. Per the agreement, the borrower paid $4.7 million as a principal paydown of the loan and will continue to pay monthly payment of principal and interest at the default rate, in addition to additional fees itemized in the aforementioned agreement. Per special servicer commentary, the loan will stay with the special servicer throughout the extension period for monitoring.
- The servicer-reported occupancies and DSCs are: 66.1% / 0.84x (YTD March 2024), 63.7% / 0.14x (FY 2023); at closing, these were 92.6% / 1.36x. At this time, KBRA does not estimate a loss on this asset.
Rivoli Crossing (4th largest, 6.7%, K-LOC, Underperform, Matured Non-Performing)
- The loan is collateralized by a 95,977 sf retail center located in Macon, Georgia, approximately five miles northwest of the Macon CBD. Loan matured in August 2023.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform based on its maturity default in August 2023, and the loan's transfer to the special servicer in June 2023. Additionally, the departure of Stein Mart in Q4 2020, which represented 37.0% of the collateral square footage pursuant to a lease scheduled to expire in August 2026 had a huge impact on the property's occupancy and financial performance. In August 2020, Stein Mart filed Chapter 11 bankruptcy and the company announced it would close all 279 of its stores as management intends to liquidate all of the company's assets. As a result of the closure, occupancy deteriorated to 51.0% as of December 2021. As of the March 2024 rent roll, occupancy is 53.3%, in line with prior years since Stein Mart's departure. The largest tenant, The Fresh Market (34.1% of total base rent, 22.1% of total sf) had a lease scheduled to expire in August 2024. Based on market research, the tenant appears to still be in-place at the property and per servicer, the tenant has provided notice of renewal. Lease rollover through 2025, inclusive of MTM tenants, represent 39.3% of total base rent, and includes the largest tenant (34.1%).
- Per servicer commentary, a forbearance was granted in April 2024 with an initial extension of maturity through August 2024 and a second extension option through August 2025. The borrower has elected to exercise its extension option, therefore extending maturity through August 2025.
- The servicer-reported occupancies and DSCs are: 53.3% / 0.85x (YTD March 2024), 48.8% / 0.81x (FY 2023); at closing, these were 90.8% / 1.42x. As of the October 2024 remittance, cumulative P&I advances totaled 35,577. KBRA’s analysis resulted in an estimated loss of $56,463 (1.0% estimated loss severity) on the loan balance of $5.5 million based on a value of $5.4 million ($56 per sf) which considers a distress liquidation value of the property.
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.
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