Press Release|CMBS
KBRA Downgrades Four Ratings and Affirms One Rating for COMM 2013-CCRE13
9 Aug 2024 | New York
KBRA downgrades the ratings of four classes of certificates and affirms one rating for COMM 2013-CCRE13, a $138.7 million CMBS conduit transaction. The transaction has seven loans remaining, six of which (97.4%) failed to pay off at scheduled maturity dates. The rating actions reflect an increase in KBRA’s estimated losses compared to KBRA’s last rating adjustments in August 2023 as well as the likelihood of interest shortfalls, which are currently impacting all classes except the Class C certificates, reaching higher in the capital structure as the servicer works through the resolution of assets.
As of the July 2024 remittance period, all seven loans have K-LOC designations, six of which (97.4%) are matured non-performing. The remaining loan (2.6%) has an ARD this month. The details of the loans are outlined below.
175 West Jackson (largest, 58.0%)
- The loan is collateralized by a 1.4 million sf, Class-A office building located in the Central Loop submarket of the Chicago CBD. The development consists of a 22-story office building with ground floor retail and a 250-space underground garage that is leased to an independent operator.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to the loan’s maturity default in November 2023 and its matured non-performing status. The loan was transferred to the special servicer for imminent monetary default during the November 2021 remittance period. During the July 2023 remittance period, the asset received a non-recoverable determination. According to the special servicer, a receiver has been appointed and is discussing potential workout solutions with the borrower, including a property sale and a deed-in-lieu.
- The servicer-reported occupancies and DSCs are: 58.0% / 0.52x (TYD March 2024), 55.0% / 1.34x (FY 2023; at closing these were 92.0% / 1.44x). An appraisal dated March 2024 valued the property at $120.0 million ($83 per sf), which is 70.7% below the $410.0 million ($282 per sf) value at issuance. As a result, the asset carries an ARA of $52.2 million, resulting in a cumulative ASER of $1.5 million. KBRA’s analysis resulted in an estimated loss of $178.8 million (71.4% estimated loss severity) on the whole loan balance of $250.5 million.
Park Plaza (2nd largest, 11.5%)
- The loan is collateralized by a four-story, 210,774 sf suburban office property located in Naperville, Illinois, approximately 28 miles west of the Chicago CBD.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to low occupancy, the loan’s maturity default in November 2023, and its matured non-performing status. Travelers Indemnity Company, (Travelers, previously 51.0% of property sf) vacated at lease expiration in June 2024, resulting in property occupancy of approximately 18.0%. The loan was structured with a cash flow sweep that began 12 months prior to the Travelers lease expiration and as of the July 2024 remittance period, there is $2.6 million ($12 per sf) available.
- The servicer-reported occupancies and DSCs are: 69.0% / -0.96x (FY 2023), 69.0% / 1.36x (FY 2022); at closing, these were 94.0% / 1.76x. An appraisal dated January 2024 valued the property at $5.1 million ($24 per sf), which is 78.8% below the $24.0 million ($114 per sf) value at issuance. As a result, the asset carries an ARA of $9.5 million, resulting in a cumulative ASER of $149,220. KBRA’s analysis resulted in an estimated loss of $11.9 million (74.7% estimated loss severity) on a loan balance of $16.0 million.
525 West 22nd Street (3rd largest, 10.2%)
- The loan is collateralized by a 16,225 sf retail space located in the Chelsea neighborhood of New York's Manhattan Borough. The property is currently leased to four art galleries.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to weak financial performance, the loan’s maturity default in December 2023, and its matured non-performing status. During the COVID-19 pandemic, property occupancy declined to 42.0%. Although the borrower was able to increase occupancy back to 100%, the new tenants have lower rental rates, which have impacted property cash flow. According to the special servicer, the borrower has declined a proposed forbearance agreement that requires a principal paydown, and therefore, the lender will pursue a deed-in-lieu.
- The servicer-reported occupancies and DSCs are: 100% / 1.24x (YTD September 2023), 100% / 0.96x (FY 2022); at closing, these were 100% / 1.55x. An appraisal dated January 2024 valued the property at $16.9 million ($1,042 per sf), which is 32.4% below the $25.0 million ($1,541 per sf) value at issuance. KBRA’s analysis resulted in an estimated loss of $1.7 million (12.2% estimated loss severity) on a loan balance of $14.2 million.
The remaining four loans account for 20.2% of the pool balance.
- Plaza Riviera (4th largest, 7.0%) is collateralized by a 51,407 sf office property located in Redondo Beach, California, approximately 20 miles southwest of the Los Angeles CBD. The loan failed to pay off at maturity in November 2023 after being granted several forbearances. According to the special servicer, the borrower and lender have agreed to another forbearance agreement that includes a $1.5 million principal paydown and a recourse guaranty. KBRA’s analysis resulted in an estimated loss of $1.7 million (17.4% estimated loss severity) on a loan balance of $9.7 million.
- Hampton Inn Pittsburgh Airport (5th largest, 6.6%) is collateralized by a 127-key limited-service hotel located in Moon Township, Pennsylvania, approximately 15 miles northwest of the Pittsburgh CBD and approximately five miles from Pittsburgh International Airport. The loan failed to pay off at maturity in December 2023. A receiver is currently in place while the lender evaluates the next steps. KBRA’s analysis resulted in an estimated loss of $2.6 million (27.7% estimated loss severity) on a loan balance of $9.2 million.
- 6th and Rio Retail (6th largest, 4.0%) is collateralized by a 19,259 sf unanchored retail property located in downtown Austin, Texas. There are two tenants, Rio, which is a bar and event venue, and Powder Room, which is a champagne lounge and nightclub. The loan failed to pay off at maturity in December 2023 and the borrower filed for Chapter 11 bankruptcy around the same time in anticipation of a foreclosure sale. According to the special servicer, a bankruptcy trustee has been appointed and the property is being marketed for sale. At this time, KBRA does not estimate a loss on this asset.
- Walgreens – Silsbee, TX (7th largest, 2.6%) is collateralized by a 14,550 sf single-tenant retail property in Silsbee, Texas, approximately 93 miles northeast of Houston. The property is 100% leased to Walgreens through 2085. The loan was recently 30+ days delinquent in January 2024 but has remained current since then. The loan has an ARD of August 2024 and a final maturity of January 2035. At this time, KBRA does not estimate a loss on this asset.
Details concerning the classes with rating changes are as follows:
- Class C to BB (sf) from A- (sf)
- Class PEZ to BB (sf) from A- (sf)
- Class D to CC (sf) from B- (sf)
- Class E to C (sf) from CC (sf)
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 continuing magnitude and extent of interest shortfalls on the certificates.
To access rating and relevant documents, click here.