KBRA Downgrades One Rating and Affirms One Rating for JPMBB 2013-C17
27 Nov 2024 | New York
KBRA downgrades the rating of Class E to B- (sf) from BB- (sf) and affirms the rating of Class F at CCC for JPMBB 2013-C17, a $58.8 million CMBS conduit transaction, which has three assets remaining in the underlying mortgage pool, all of which have matured and been identified as K-LOCs. The rating actions follow a surveillance review of the transaction and are based on the increase in KBRA’s estimated losses since KBRA’s last rating change in December 2023. The rating changes also consider the likelihood of interest shortfalls increasing and impacting the remaining classes during the resolution of the transaction’s remaining three loans, all of which are specially serviced.
As of the October 2024 remittance period, the remaining three loans are all specially serviced, two are in foreclosure(86.0%) and one is non-performing matured balloon (14.0%). The details of the loans are outlined below.
Chinatown Row (largest loan, 45.5%, K-LOC, Underperform, Foreclosure)
- The loan is collateralized by a 47,562-sf, mixed-use, four-building development located in the Chinatown District of Washington, DC.
- KBRA maintains its K-LOC designation and KPO of Underperform due to its failure to pay off at its November 2023 maturity date and its foreclosure status with the special servicer. The asset’s issues stem from a decline in performance attributable to the departure of WeWork in 2021. Prior to its departure, WeWork represented 38.4% of base rent and 56.0% of the total property square footage. Occupancy has remained in the 30.0% range since that time. According to the most recent servicer commentary, a receiver was appointed in April 2024.
- The servicer-reported occupancies and DSCs are 40.0%/0.32x (YTD 6/2023); 40.0%/0.10x (FY 2022); at issuance these were 100.0%/1.26x. An appraisal dated April 2024 valued the property at $17.2 million ($362 per sf), which is 41.5% below the $29.4 million ($618 per sf) value at issuance. As a result, the asset carries an ARA of $11.6 million. KBRA estimates a $13.4 million loss based on a $15.5 million ($326 per sf) valuation of the asset, which is 90% of the April 2024 appraised value.
801 Travis (2nd largest, 40.6%, K-LOC, Underperform, Foreclosure)
- The loan is collateralized by a 220,382-sf office building located in the Houston, Texas CBD.
- KBRA maintains its K-LOC designation and KPO of underperform based on its failure to pay off at its November 2023 maturity date and foreclosure status with the special servicer. The asset’s issues stem from a decline in performance, which is primarily attributable to significant tenant rollover, including the departure of Andrews & Kurth (formerly 19,288 sf, 9.0% of base) in a challenged Houston office market.
- The servicer-reported occupancies and DSCs are: 53.0% / 0.30x (YTD June 2023); 53.0%/0.34x (FY 2022); at issuance these were 81.6% /1.37x. An appraisal dated April 2024 valued the property at $19.9 million ($90 per sf), which is 29.9% below the $28.4 million ($129 per sf) value at issuance. As a result, the asset carries an ARA of $4.5 million. KBRA estimates a $16.6 million loss based on a value of $7.5 million ($34 per sf), which considers a distressed non-stabilized liquidation of the asset.
Deville Plaza (3rd largest, 14.0%, K-LOC, Underperform)
- The loan is collateralized by a 162,376-sf unanchored strip retail property in Jackson, Mississippi.
- KBRA maintains its K-LOC designation and KPO of Underperform due to the special servicer pursuing foreclosure and the loan's failure to pay off at its December 2023 maturity date. The subject property collateralizing the Deville Plaza loan was contributed to an auction on May 1, 2024 and was sold subject to a due diligence period. We expect the asset to be released from the trust in the near term. However, we do not know the agreed upon sales price for the asset.
- The servicer-reported occupancies and DSCs are: 83.0%/1.40x (YTD June 2019), 84.0%/1.65x (FY 2018); at issuance these were 94.0% /1.48x. KBRA estimates a $5.3 million loss on the asset based on a $3.9 million value ($24 per sf), which assumes a distressed auction price of the asset.
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 asset in the transaction, as well as the continuing magnitude and extent of interest shortfalls on the certificates.
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