Press Release|CMBS

KBRA Affirms All Ratings for MSBAM 2013-C9

12 Sep 2024 | New York

KBRA affirms all of its outstanding ratings for MSBAM 2013-C9, a $227.1 million CMBS conduit transaction. The affirmations follow a surveillance review of the transaction which has three remaining loans. Since last review, the largest remaining loan Milford Plaza Fee (72.7% of the pool balance)was assumed and modified and Dartmouth Mall (5.2% of the original pool balance) has paid off . Of the other two remaining loans, one is a K-LOC (22.4%) and the other is a performing loan. The details of the loans are outlined below.

Milford Plaza Fee (largest, 72.7%, K-LOC, Underperform)

The loan was originally collateralized by a leased fee interest in the land underlying the Row NYC hotel, formerly the Milford Plaza, which is a 28-story, 1,331-key select-service hotel located in the Times Square area of Midtown Manhattan. The ground lease was originally set to expire in 2112. However, an assumption and modification agreement was executed in May 2024 which consolidated the ownership of the underlying land and the above-ground structure, as well as included a four-year extension through June 2028. As a result, the loan was no longer deemed as non-recoverable.
KBRA maintains the loan's K-LOC designation and its KPO of Underperform based on the past foreclosure, its transfer to the special servicer during the June 2020 remittance and its delinquency in payment. The loan was initially transferred to the special servicer in June 2020 due to imminent default. A ground lease default by the hotel operator (Rockpoint/Highgate, the leasehold owner) in April 2020 resulted in the subject loan becoming delinquent. The sole source of payment for the loan was derived from ground rent payments received from the leasehold owner of the hotel condominium unit. The leasehold owner stopped paying rent to the borrower in April 2020 and has failed to remit any cash flow generated from the hotel. According to the special servicer, the leasehold tenant signed a sublease with the NYC Health and Hospitals in October 2022 without seeking the lender or borrower's prior consent. The hotel is currently closed to the public per the website, as the sublease encumbers the entire hotel, with the exception of the two penthouses.
Per the assumption and modification agreement, the purchaser (Highgate) will own and operate the property. In addition, the ARD structure has been removed from the loan with a modified maturity date of June 2028. The interest rate remains the same at 3.48% fixed and all past due advances will be paid through available cash flow. All default interest and late charges accrued since the original default will be waived. The loan will be cash managed and no cash flow will be distributed to purchaser until all outstanding advances are repaid. Purchaser will be responsible for approximately $12.0 towards other advances, of which half was paid at closing and the remaining outstanding advances will accrue interest and be paid through available cash flow. . The lockbox reserve balance as of August 2024 is $600 after a $7.2 million reserve disbursement. Furthermore, purchaser plans a complete renovation of the hotel with an estimated budget of $70.0 million once the lease with the City is terminated or expires. The sublease, originally set to expire in April 2024 with the City was renewed for two additional years through April 2026. According to the special servicer, the loan is expected to return to the master servicer after the rehabilitation period.
An appraisal dated April 2024 valued the property, inclusive of the structure, at $350.0 million ($262,960 per key), which is 9.3% lower than the $386.0 million ($290,000 per key) appraised value at issuance. At this time, KBRA does not estimate a loss on this asset, which has a whole loan balance of $275.0 million.

Apthorp Retail Condominium (2nd largest, 22.4%, K-LOC, Underperform)

The loan is collateralized by four ground-level retail suites totaling 10,981 sf and one multi-level office suite (1,870 sf) in the 161-unit luxury residential condominium building known as The Apthorp. The building is located along Broadway in the Upper West Side area of Manhattan in New York City. The loan is scheduled to mature in March 2033.
KBRA maintains the loan's K-LOC designation and its KPO of Underperform due to a decline in financial performance since issuance. According to the May 2024 rent roll, the property was 82.4% leased, up from last review (74.6%) and down from 100% at closing. The decline in occupancy since closing is primarily due to the departure of Apthorp (17.6% of collateral square footage), which vacated ahead of its February 2035 lease expiration. A new tenant, TGF Broadway has backfilled a portion of the former Apthorp space (7.8%) and accounts for 3.4% of total base rent with a lease that is scheduled to expire in July 2028.
The servicer-reported occupancies and DSCs are: NA / 0.42x (YTD March 2024), 82.0% / 0.84x (FY 2023); at closing, these were 81.0% / 1.21x. At this time, KBRA does not estimate a loss on this asset.

Brighton Shopping Center (3rd largest, 4.9%)

The loan is collateralized by a 299,208 sf retail center in Brighton, Michigan, approximately 40 miles northwest of Detroit. The loan is scheduled to mature in March 2032.
KBRA maintains a KPO of Perform on this loan based on stable financial performance since issuance. The property has benefited from historically strong occupancy and financial performance exceeding underwritten expectations. According to the Annualized March 2024 servicer financials, the NCF was $2.2 million with a DSC of 1.27x, which represents a 4.8% increase from $2.1 million and 1.23x, at closing. According to the March 2024 rent roll, the property was 88.8% leased, in line with last review (88.8%) and with issuance (85.3%). Lease rollover through 2025 represents 29.5% of total base rent and includes the second largest tenant, Marshalls (15.1% of total sf, 12.4% of total base rent), which has a lease scheduled to expire in July 2025. The tenant has three, five-year extension options remaining. Additionally, the former second largest tenant by base rent, Best Buy (12.0% of base rent) has since renewed its lease scheduled to initially expire in 2024 to January 2029 and reports lower base rent than last review.
The servicer-reported occupancies and DSCs are: NA / 1.27x (YTD March 2024), NA / 1.21x (FY 2023); at closing, these were 85.0% / 1.23x.

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KBRA Affirms All Ratings for MSBAM 2013-C9

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