DBRS Morningstar Changes Trends on Two Classes and Confirms All Classes of COMM 2013-CCRE7 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE7 issued by COMM 2013-CCRE7 Mortgage Trust as follows:

-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

DBRS Morningstar changed the trends on Classes E and F to Negative from Stable. Class G’s trend is Negative and has been since December 10, 2020. All other trends are Stable. The Negative trends reflect DBRS Morningstar’s concerns with several loans on the servicer’s watchlist and in special servicing, most notably the Lakeland Square Mall (Prospectus ID #2, 12.9% of the pool), which were analyzed with elevated expected losses. Additionally, refinance risk could pose a problem with all remaining loans scheduled to mature in 2023.

The rating confirmations reflect the overall stable performance of the transaction since issuance, when the pool consisted of 59 loans with an initial balance of $936.2 million. As of the October 2021 remittance, there has been collateral reduction of 51.7% as a result of loan repayment, liquidations, and scheduled amortization. Fifteen loans have been repaid in full since issuance and one loan, Sunset Plaza (Prospectus ID #28), was liquidated in July 2021 with a $2.4 million loss, representing a loss severity of approximately 34.5%. The transaction benefits from a high concentration of defeasance, with 12 loans defeased, representing 25.5% of the remaining pool balance. As of the October 2021 remittance, there are two loans, representing 3.6% of the pool, in special servicing, and 13 loans, representing 49.0% of the pool, are on the servicer’s watchlist.

The largest and most pivotal loan on the servicer’s watchlist is the largest remaining loan in the pool, Lakeland Square Mall. The loan is secured by 535,937 square feet (sf) of in-line and anchor space in an 883,290-sf regional mall in Lakeland, Florida, 35 miles east of Tampa. The loan is sponsored by Brookfield Properties. This loan was initially added to the servicer’s watchlist in June 2020 after the borrower made a Coronavirus Disease (COVID-19)-relief request. As of July 2021, the loan is being monitored for low debt service coverage ratio (DSCR), which was reported at 1.10 times (x) in the T-6 period ended June 30, 2021, and 1.45x as of YE2020. While the current DSCR is partially a result of the pandemic as a number of tenants were granted rent deferrals, the loan’s performance had fallen short of issuance expectations pre-pandemic, consistently reporting net cash flow (NCF) below the issuer’s underwritten NCF of $7.1 million, with 2019’s NCF reported at $6.3 million. Collateral occupancy was most recently reported at 94% in March 2021 and 95% as of YE2020.

Since 2017, two of the mall’s noncollateral anchor stores, Sears and Macy’s, have closed and no replacement tenants have been signed. Remaining anchors include Dillard’s (noncollateral), JCPenney (19.4% of the net rentable area (NRA), lease through November 2025), Burlington Coat Factory (15.3% of the NRA, lease through January 2023), and Cinemark (8.8% of the NRA, lease through February 2024). As noted above, several tenants received rent deferrals as a result of the coronavirus pandemic, including Cinemark and Urban Air Adventure Park (7.8% of the NRA, lease through September 2028). Cinemark received rent deferral from April 2020 through September 2020 and recommenced full rent payments in October 2020. It is scheduled to repay the deferred rent in 18 payments commencing in June 2021. Similarly, Urban Air Adventure Park received various rent abatements and deferrals totalling approximately $367,000. This amount shall be repaid in 18 payments commencing January 2022. DBRS Morningstar analyzed this loan with an elevated probability of default.

The two loans in special servicing include NCH Portfolio (Prospectus ID #25, 2.1% of the pool) and Tifton Plaza (Prospectus ID #33, 1.6% of the pool). The larger loan, NCH Portfolio, is secured by a portfolio of three limited service hotels with a combined 222 rooms located in rural and tertiary markets in Illinois, North Dakota, and Minnesota. The loan transferred to special servicing in April 2020 for imminent default following the borrower’s coronavirus relief request. This loan has been underperforming for several years, with DSCRs just above 1.00x. Performance declines since issuances have been driven by falling demand near the Bakken oil formation in North Dakota and the loss of various corporate accounts. The loan has been reported as current throughout the pandemic and a loan modification was approved to allow for furniture, fixtures, and equipment funds to be used to cover operating shortfalls. The special servicer commentary notes that a return to the master servicer is pending. DSCR was reported at 0.63x as of June 2021, unchanged from YE2020. DBRS Morningstar analyzed this loan with an elevated probability of default.

The Tifton Plaza loan is secured by a 220,165-sf anchored retail centre in Tifton, Georgia, 92 miles northeast of Tallahassee, Florida. This loan transferred to special servicing in July 2020 due to payment default and remains delinquent as of the October 2021 remittance. A loan modification was approved to allow the sponsor to use leasing reserves to fund operating shortfalls and, as of October 2021, the loan reports total reserves of $104,000. According to the special servicer, the current workout strategy entails the borrower repaying delinquent amounts throughout 2021 with a contingent waiver of late charges and default interest. The subject property is anchored by Belk (21.6% of the NRA, lease through February 2024), Ollie’s Bargain Outlet (15.5% of the NRA, lease through March 2026), and TJMaxx (10.9% of the NRA, lease through October 2022). Other large tenants include Bealls Outlet, AMC Theatres, and JoAnn Fabrics. The property was reappraised in December 2020 for $4.3 million, representing a 63.4% decline from the issuance value of $11.6 million. DBRS Morningstar analyzed this loan assuming a liquidation scenario, resulting in an implied loss severity exceeding 60.0%.

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.

Classes X-A and X-B are interest-only (IO) certificates that reference 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.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577