Press Release|CMBS
KBRA Affirms All Ratings for MSBAM 2013-C10
3 Jan 2025 | New York
KBRA affirms all of its outstanding ratings for MSBAM 2013-C10, a $295.4 million CMBS conduit transaction. The affirmations follow a surveillance review and are based on the performance and expected recovery of the transaction's five remaining loans. Of the remaining loans, one is specially serviced (6.2% of the pool). KBRA identified four of the loans as K-LOCs (88.0%), including three (50.8%) with estimated losses. The details of the K-LOCs are outlined below.
Westfield Citrus Park (largest, 41.1%, K-LOC, Underperform)
- The loan is collateralized by a 506,922 sf portion of a 1.1 million sf regional mall located in Tampa, Florida, approximately 15 miles northwest of the city’s CBD. The mall anchors are Dillard’s, JCPenney, and Macy’s, all of which own their respective land and improvements and are not collateral for the loan. Sears, which was also not collateral for the loan, closed in September 2018. Elev8, a family entertainment center, opened in the vacant anchor space in May 2023.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on its history with the special servicer and modification. The loan transferred to special servicing in July 2020 due to imminent default. In April 2022, there was a receiver sale and the loan was assumed and modified. The modification included the new borrower bringing the loan current and a five-year extension through June 2028. The new borrower, Hull Property Group, assumed the whole loan and will pay interest-only debt service based on the entire debt, however, at disposition repayment will be subject to a modified waterfall. At disposition, the first $6.0 million will be distributed to the borrower, the subsequent $45.0 million will be distributed to the lender, and any remaining proceeds will be split 50/50. The loan was returned to the master servicer in June 2022. The largest tenant, Regal (17.4% of collateral sf), vacated in June 2023 prior to its 2024 lease expiration while the tenant was in bankruptcy. Since last review, the theater space has been re-leased to NCG Cinema.
- The servicer-reported occupancies and DSCs are: 93.4% / 1.91x (YTD June 2024), 87.0% / 2.17x (FY 2023); at issuance these were: 93.5% / 1.58x. An appraisal dated August 2021 valued the property at $89.0 million ($176 per sf), which is 61.1% below the $229.0 million ($452 per sf) value at issuance. KBRA's analysis resulted in an estimated loss of $71.2 million (58.6% estimated loss severity). The loss is based on a KBRA liquidation value of $61.5 million ($121 per sf) and the waterfall per the modification. The value is derived from a direct capitalization approach using a KNCF of $8.6 million and a capitalization rate of 14.00%.
Milford Plaza Fee (2nd largest, 37.2%, 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. The purchaser was responsible for approximately $12.0 million in outstanding advances, of which half was paid at closing and the remaining outstanding advances will accrue interest and be paid through available cash flow. 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 at a rate of $175 per key per night. The loan returned to the master servicer in October 2024.
- 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.
Oak Brook Office Center (4th largest, 6.2%, Specially Serviced, K-LOC, Underperform)
- The loan is collateralized by a 312,212 sf suburban office building located in Oak Brook, Illinois, approximately 20 miles southwest of the Chicago CBD.
- KBRA maintains the loan’s K-LOC designation and its KPO of Underperform based on its status with the special servicer. The loan transferred to the special servicer in April 2022 due to payment default. The property’s largest tenant at closing, Sanford L.P. (38.5% of sf), vacated in June 2014 prior to its December 2021 lease expiration date. The borrower chose not to support the property and the lender filed a foreclosure and receivership action. A receiver was appointed in July 2022. According to special servicer commentary, the property was under contract with a portion of the site expected to be redeveloped, however, the contract was terminated by the buyer in October 2024. The special servicer is now evaluation options for disposition.
- The servicer-reported occupancies and DSCs are: 30.6% / -0.35x (YTD September 2024), 32.4% / -0.31x (FY 2023), 32.4% / -0.58x (FY 2022); at issuance these were: 89.3% / 1.50x. An appraisal dated March 2024 valued the property at $15.0 million ($48 per sf), which is 54.5% below the $33.0 million ($106 per sf) value at issuance. KBRA's analysis resulted in an estimated loss of $12.7 million (69.0% estimated loss severity). The loss is based on a KBRA liquidation value of $7.2 million ($23 per sf). The value is derived from a direct capitalization approach using a KNCF of $1.4 million, which assumes a vacancy rate of 30.0%, a capitalization rate of 11.00%, and a downward adjustment to account for TI/LC costs and income lost during the stabilization period.
262-270 East Fordham Road (5th largest, 3.5%, K-LOC, Underperform)
- The loan is collateralized by a 20,300 sf unanchored retail property located in the Bronx, New York.
- KBRA maintains the loan's K-LOC designation based on its history with the special servicer and low occupancy. The loan transferred to the special servicer in May 2023 for maturity default. The loan was modified, extending maturity to May 2026, and the loan returned to the master servicer in March 2024. At closing, the property was 100% occupied by two tenants: Modell's (64.5% of collateral sf) and Finish Line (35.5%). Modell's vacated following its 2020 bankruptcy and Finish Line vacated at its December 2021 lease expiration. The former Modell's space was leased to Pretty Girl, however, the tenant planned to vacate at its December 2023 lease expiration. The former Finish Line space was leased to a temporary tenant that vacated in August 2024. Servicer commentary indicates the borrower has four prospective tenants.
- The servicer-reported occupancies and DSCs are: 100% / 0.09x (YTD June 2024), 100% / 0.37x (FY 2023), 100% / -0.12x (FY 2022); at issuance these were: 100% / 1.48x. An appraisal dated October 2023 valued the property at $12.1 million ($596 per sf), which is 39.5% below the $20.0 million ($985 per sf) value at issuance. KBRA's analysis resulted in an estimated loss given default of $3.0 million (29.1% estimated loss severity). The loss is based on a KBRA liquidation value of $9.1 million ($447 per sf) which is equal to 75.0% of the appraisal. The value considers a potentially protracted workout process/difficulty in stabilizing 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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