DBRS Morningstar Confirms Ratings of COMM 2013-300P Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings of the Commercial Mortgage Pass-Through Certificates issued by COMM 2013-300P Mortgage Trust (the Issuer) as follows:

-- Class A-1 at AAA (sf)
-- Class A1P at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class X-A at AAA (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains generally in line with DBRS Morningstar’s expectations at issuance. The collateral is a first-mortgage loan on 300 Park Avenue, which is secured by the fee simple interest in a Class A, 25-story LEED Silver-certified Midtown Manhattan office tower on the west side of Park Avenue between 49th and 50th Streets in New York. Constructed in 1954, the property’s layout consists of 24 office levels, a ground floor with retail, and a subterranean level with storage space.

The 10-year $485 million interest-only (IO) loan provided refinancing to pay off existing debt of $135.2 million, pay an upstream distribution of $334.3 million to the sponsors, fund $13.1 million in closing costs, and fund a tax reserve of $2.5 million. The sponsor on the loan is Prime Plus Investments, LLC, which is indirectly owned by Tishman Speyer Crown Equities 2007 LLC (Tishman Speyer); the National Pension Service acting for the National Pension Fund of the Republic of Korea; the Government of Singapore Investment Corporation (Realty) Pte Ltd.; and Andra AP-fonden, the Second Swedish National Pension Fund (AP2) of the Kingdom of Sweden. Tishman Speyer also serves as the property manager.

The property’s largest tenant is the Colgate-Palmolive Company (Colgate) and the building is often referred to as the Colgate-Palmolive Building. At issuance, Colgate occupied 503,637 sf of the building, representing 65.3% of the net rentable area (NRA) and approximately 77.9% of in-place annual rent. Colgate operates its corporate headquarters at the property and has been in tenancy since the building opened. The company extended its lease in 2008 with an initial lease expiry in June 2023, which included one 10-year extension option and an additional five-year extension option. In May 2019, Colgate exercised the 10-year renewal option and moved its lease expiry to 2033, but only retained 241,657 sf at a reduced rental rate of $93 per sf (psf), compared with $126 psf at issuance. Colgate also returned 97,343 sf of its original space in May 2020, but will continue to pay $140 psf for this space through the June 2023 expiry.

At issuance, the property’s second-largest tenant was Greenhill & Company (Greenhill), which occupied 104,863 sf of the building, representing 13.6% of the NRA with a lease that expired in October 2020. According to an article published by The Real Deal in November 2020, the tenant planned to relocate and downsize its headquarters from the subject property to Rockefeller Group’s 1271 Sixth Avenue building within the near term. The article reported that Greenhill planned to occupy 78,000 sf at the new location paying a rental rate of $91 psf compared with $80 psf at the subject property. DBRS Morningstar has reached out to the servicer for a leasing update and to confirm that the tenant has vacated its space from the subject property, with a response pending as of the date of this press release.

As of Q3 2020, the servicer reported an annualized net cash flow (NCF) of $39.7 million and debt service coverage ratio (DSCR) of 1.82 times (x) compared with the YE2019 DSCR of 2.31x. The net cash flow decline in 2020 was primarily driven by Colgate’s downsizing and decrease in rental rates for a portion of its space throughout the year, following the renegotiated lease terms in May 2019. The Q3 2020 annualized NCF reflects a 5.7% decline when compared with the DBRS Morningstar NCF of $42.1 million. DBRS Morningstar considered Greenhill’s lease expiration when the ratings were assigned in April 2020 and applied a negative qualitative adjustment for cash flow volatility to account for additional tenant rollover.

According to the September 2020 rent roll, the property was 89.7% occupied compared with the December 2019 occupancy rate of 95.0%. The subject averages a rental rate of $92.80 psf for the office space, which is above office properties within the ¬¬¬grand central submarket that reported an average asking rental rate of $77.64 psf and an effective rate of $64 psf, according to the Q4 2020 Reis market report, which showed an overall submarket vacancy rate of 8.8% for the period. Despite the rollover concerns, which are elevated given the leasing hurdles resulting from the Coronavirus Disease (COVID-19) pandemic, the property does benefit from experienced sponsorship and a prime location along Park Avenue, with historical occupancy rates above 90.0% since issuance.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Class X-A is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.
All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides issuance metrics and all historical surveillance commentary on the DBRS Viewpoint platform.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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