KBRA Affirms All Ratings for MSBAM 2013-C8
3 Jan 2025 | New York
KBRA affirms all ratings for MSBAM 2013-C8, a $43.4 million CMBS conduit transaction, which has three assets remaining in the underlying mortgage pool, all of which have been identified as K-LOCs. The affirmations follow a surveillance review of the transaction and are based on the performance and expected recovery of the transaction's remaining three loans, which have not meaningfully changed since KBRA’s last review in January 2024. As of the December 2024 remittance period, two of the remaining loans (86.9%) have been modified and are performing after receiving maturity extensions while one loan (13.1%) remains specially serviced despite its modification. The details of the loans are outlined below.
The Atrium at Fashion Center (largest, 45.7%, K-LOC, Underperform)
- The loan is collateralized by a 173,073 sf retail center located in Paramus, New Jersey, approximately 12 miles northwest of New York City. The property is situated on State Route 17, two miles north of the Garden State Parkway. The property is currently leased to two tenants, Buy Buy Baby and TJ Maxx.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to the loan’s modification and recent delinquency. The loan was transferred to the special servicer in January 2023 for imminent monetary default when the borrower indicated that it would be unable to pay off the loan at its February 2023 maturity date. The property was impacted by Bed, Bath & Beyond’s bankruptcy and closure at the subject in January 2023, resulting in a decline in occupancy to 71.4%. Since then, the special servicer approved a loan modification which extended the loan’s maturity date to February 2024 and the loan returned to the master servicer in April 2024. The modification provided two additional one-year extension options, one of which has been utilized, extending the maturity date through February 2025. According to the master servicer, the borrower is in negotiations with Ross and Grocery Outlet to re-tenant the vacant 48,000 sf Bed, Bath, & Beyond space.
- The servicer-reported occupancies and DSCs are: 71.0% / 0.43x (YTD June 2024), 72% / 0.38x (FY 2023); at closing these were 100% / 1.68x. An appraisal dated May 2023 valued the property at $13.5 million ($78 per sf), which is 66.6% below the $40.4 million ($233 per sf) appraised value at issuance. As a result, a $103,158 ASER remains outstanding. KBRA’s analysis resulted in an estimated loss given default of $8.3 million (41.9% estimated loss severity) based on a liquidation value of $13.1 million ($75/sf). The value is derived from a direct capitalization approach using a stabilized KNCF of $1.2 million and a capitalization rate of 9.00%.
11451 Katy Freeway (41.2%, K-LOC, Underperform)
- The loan is collateralized by a 117,261 sf, Class-A office building located in Houston, Texas, approximately 15 miles west of the CBD.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to its failure to pay off at its January 2023 maturity date and subsequent modification. Property cash flow performance has been impacted by low occupancy throughout the loan term. The subject is located in Houston’s Energy Corridor and has exposure to oil and gas industry tenants. The loan was transferred to the special servicer in August 2022 when the borrower expressed interest in transferring the property’s title to the trust. The property was marketed for sale and the winning bidder, Mission Companies, expressed interest in a loan modification and assumption, which were approved in December 2023. The modification converted the loan to from amortizing debt service payments to interest-only debt service, required the new borrower to contribute new equity, and extended the loan through December 2027, among other terms.
- The servicer-reported occupancies and DSCs are: 81.0% / 1.00x (YTD September 2024), 94.0% / 1.09x (FY 2022); at closing these were 95.0% / 1.47x. An appraisal dated April 2023 valued the property at $17.1 million ($146 per sf), which is 47.6% lower than $32.6 million ($278 per sf) at issuance. As a result, a $165,360 ASER remains outstanding. KBRA’s analysis resulted in an estimated loss given default of $5.9 million (32.8% estimated loss severity) based on a liquidation value of $9.5 million ($81 per sf). The value is derived from a direct capitalization approach using a KNCF of $856,000 and a capitalization rate of 9.00%.
Fairfield Inn Columbus (13.1%, K-LOC, Underperform, Specially Serviced)
- The loan is collateralized by an 85-key limited-service hotel located in Columbus, Mississippi, 10 miles west of the Alabama border and 27 miles east of Starkville, Mississippi, home of Mississippi State University.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to its status with the special servicer and delinquency history. The loan’s DSC has been below 1.00x since 2016, with the exception of FY 2021 when a 1.08x DSC was reported. The loan was previously transferred to the special servicer in September 2020 for monetary default and was later modified in April 2022. The maturity date was extended to February 2025 along with a $1.1 million equity contribution from the borrower. The loan was subsequently returned to the master servicer but again transferred to the special servicer in August 2024 related to the upcoming maturity in February 2025. The special servicer then approved a second loan modification, extending the maturity date through February 2026, requiring the borrower to make a 5.00% principal paydown, and pay an extension fee, among other terms.
- The servicer-reported occupancies and DSCs are: 69.0% / 1.10x (TTM June 2024), 67.0% / 1.10x (FY 2023); at closing these were 75.0% / 1.74x. An appraisal dated September 2024 valued the property at $6.6 million ($77,647 per key), which is 53.2% below the $14.1 million ($165,882 per key) value at issuance. The asset carries a $1.1 million ARA and there is a modest cumulative ASER of $105,905 outstanding. At this time, KBRA does not estimate a loss on this 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 assets in the transaction, as well as, the magnitude and extent of interest shortfalls, if any, on the certificates.
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