KBRA Affirms All Ratings for COMM 2013-CCRE10
24 Jan 2025 | New York
KBRA affirms all of its outstanding ratings for COMM 2013-CCRE10, a $38.0 million CMBS conduit transaction, which has two assets remaining in the underlying mortgage pool, both of which have been identified as K-LOCs. The affirmations follow a surveillance review of the transaction and are based on the performance and recovery analysis of the transaction's remaining two loans, which have not meaningfully changed since KBRA’s last review in January 2024. As of the January 2025 remittance period, both of the remaining loans have been modified and extended. One loan is specially serviced (89.8%) and a non-performing matured balloon while the other (10.2%) is current in payment. The details of the loans are outlined below.
Prince Kuhio Plaza (largest, 89.8%, K-LOC, Underperform, Non-Performing Matured Balloon)
- The loan is collateralized by the borrower’s leasehold interest in a 444,240 sf portion of Prince Kuhio Plaza, a 506,113 sf, single-story regional mall located in Hilo, Hawaii, which is along the eastern shore of the Island of Hawaii, also known as the Big Island. The property is anchored by Macy's (collateral) and Macy's Men’s Children’s Home Store (non-collateral). Sears (collateral) closed in April 2021. The loan sponsor is Brookfield Property Partners L.P. The property is encumbered by a ground lease between the sponsor and the State of Hawaii, Department of Hawaiian Homelands (DHHL) that expires in September 2042.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to the loan’s failure to pay off at its July 2023 maturity date, as well as the previous closure of Sears. The loan was transferred to the special servicer in June 2023 for imminent default and the loan was non-performing as of the January 2025 remittance period. A loan modification was approved in July 2023, which extended the loan's maturity date 12 months until July 2024 and incorporated a 12-month forbearance option, which was exercised by the borrower. As part of the modification and forbearance agreement, the borrower contributed $5.0 million in equity into an Omnibus Reserve Account. According to the servicer, as a result of the forbearance, the loan will begin accruing default interest of 3.00% and is now due in July 2025. Further, the cash flow sweep will remain in place during any extension period and the balance was $11.7 million as of January 2025. Additionally, efforts to extend the ground lease beyond its current expiration in 2042 have encountered opposition from the Department of Interior due to the complexity of the ground lease, which is creating challenges for refinancing. The servicer believes that the forbearance will give the borrower additional time for ground lease negotiations to resolve, better positioning the loan for a refinance. Prince Kuhio Plaza has a Green Street TAP Score of 19, a Mall Grade of B-, and has little competition within its primary trade area, especially on the Island of Hawaii.
- The servicer-reported occupancies and DSCs are: 94.0% / 2.55x (YTD September 2024), 93.0% / 2.89x (FY 2023), 90.0% / 1.98x (FY 2022); at closing these were 95.0% / 1.98x. An appraisal dated April 2024 valued the property at $54.0 million ($122 per sf), which is 23.9% below the $71.0 million ($160 per sf) appraised value at issuance. At this time, KBRA does not estimate a loss on the $34.2 million loan balance.
Starks Parking Louisville (2nd largest, 10.2%, K-LOC, Underperform)
- The loan is collateralized by a 182,817 sf multi-level parking garage located in the Louisville, Kentucky CBD. The garage contains 725 spaces, and demand for the garage is driven by the Omni Louisville Hotel, the Fourth Street Live! shopping mall, and the Kentucky International Convention Center.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to the loan’s weak performance and the loan’s failure to pay off at its initial August 2023 maturity date. The loan was transferred to the special servicer in September 2023 and maturity was most recently extended via modification until August 2025. Following the extension, the loan was returned to the master servicer in August 2024. The property is fully leased to a parking operator and the borrower indicated that the property has experienced a significant decrease in usage since the onset of the COVID-19 pandemic.
- The servicer-reported occupancies and DSCs are: 100% / 0.34x (YTD March 2023), 100% / 0.53x (FY 2022); at closing these were 100% / 1.31x. An appraisal dated April 2024 valued the property at $5.1 million ($28 per sf), which is 42.7% below the $8.9 million ($79 per sf) appraised value at issuance. KBRA’s analysis resulted in an estimated loss given default of $1.9 million (48.9% estimated loss severity) on the $3.9 million loan balance based on a liquidation value of $1.97 million ($11 per sf). The value is derived from a direct capitalization approach using a KNCF of $236,800 and a capitalization rate of 12.00%.
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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