DBRS Morningstar Confirms All Classes of COMM 2013-CCRE10 Mortgage Trust, Maintains Negative Trends on Two Classes

DBRS Limited (DBRS Morningstar) confirmed the ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE10 issued by COMM 2013-CCRE10 Mortgage Trust as follows:

-- Class A-3 at AAA (sf)
-- Class A-3FL at AAA (sf)
-- Class A-3FX at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

DBRS Morningstar changed the trend on Class D to Stable from Negative. Classes E and F continue to carry Negative trends. All other trends are Stable.

The rating confirmations reflect the overall stable performance of the pool since issuance. According to the February 2022 remittance, 45 of the original 59 loans remain in the pool with a total trust balance of $675.2 million, representing a collateral reduction of 33.2% since issuance. Since the last rating action, two loans, with a cumulative original balance of $108.1 million, were repaid in full. There are no loans in special servicing, and no loans are delinquent. Sixteen loans are fully defeased, representing 43.0% of the pool balance, including the largest loan in the pool, One Wilshire (Prospectus ID#1, 14.8% of the pool balance), which defeased with the February 2022 remittance. The increased credit support as a result of collateral reduction from the last rating action, and the recent defeasance of the largest loan supports the trend change on Class D to Stable.

The Negative trends on Classes E and F remain in place because of the ongoing concerns with loans on the servicer’s watchlist. There are 12 loans on the servicer’s watchlist, representing 30.8% of the pool balance. The largest loan on the servicer’s watchlist is Prince Kuhio Plaza (Prospectus ID#6, 5.5% of the pool). The loan is secured by a regional mall in Hilo, Hawaii, on the northeast coast of the Big Island. The collateral anchor tenant Sears (16.4% of the net rentable area) vacated in April 2021, ahead of its December 2021 lease expiration. As a result, physical occupancy declined to 72.1%. Despite Sears’ departure, cash management has not been triggered as the debt service coverage ratio (DSCR) remains above 1.60 times (x). The DSCR for the trailing nine-month period ended September 30, 2021, was 2.20x, and is expected to decline to 2.0x when accounting for the loss of Sears. The borrower is actively marketing the Sears space and has been able to backfill large vacancies in the past. Given the decline in occupancy and increased risk from issuance, DBRS Morningstar’s analysis for this loan includes an elevated probability of default (POD).

The General Motors Innovation Center loan (Prospectus ID#8, 4.4% of the pool) is secured by an office property in Austin, Texas, and is on the servicer’s watchlist for a decline in occupancy. At issuance, the property was occupied by a single tenant, General Motors (GM), which consolidated its operations at a nearby property and vacated the subject in 2020. In September 2021, GM took back approximately 176,000 square feet of space at the subject on a lease through December 2026, thereby increasing the occupancy rate to 55.1%. Backfilling the remaining space may be challenging based on increasing submarket vacancy in recent years; however, this is mitigated by a letter of credit of $7.6 million that was posted in lieu of a cash flow sweep tied to the departure of GM. To reflect concerns with the property’s vacancy, DBRS Morningstar’s analysis for this loan included a POD penalty.

ESG CONSIDERATIONS
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 updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#6 – Prince Kuhio Plaza (5.5% of the pool)
-- Prospectus ID#7 – SpringHill Suites/Fairfield Inn & Suites – Louisville (4.9% of the pool)
-- Prospectus ID#8 – General Motors Innovation Center (4.4% of the pool)
-- Prospectus ID#13 – Hotel Murano (2.8% of the pool)

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.

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