Morningstar DBRS Downgrades Credit Ratings on Two Classes of Citigroup Commercial Mortgage Trust 2013-GC15

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on two classes of the Commercial Mortgage Pass-Through Certificates, Series 2013-GC15 issued by Citigroup Commercial Mortgage Trust 2013-GC15 as follows:

-- Class E to CCC (sf) from B (low) (sf)
-- Class X-C to CCC (sf) from B (sf)

In addition, Morningstar DBRS confirmed the following credit rating:

-- Class F at C (sf)

All remaining classes now have credit ratings that do not typically carry a trend in commercial mortgage-backed securities (CMBS) credit ratings.

The credit ratings downgrade on Class E, and the referenced notional Class X-C bond, reflects the increased loss projections related to the five remaining loans in the pool, all of which are in special servicing and have passed their respective maturities. In the analysis for this review, Morningstar DBRS assumed a liquidation scenario for these loans, resulting in a cumulative projected loss approaching $37.0 million, which would fully erode the nonrated Class G balance and about a fourth of the Class F balance. In addition, there is an increased propensity for interest shortfalls as Class E did not receive full interest between September 2023 and February 2024 although it was repaid with the March 2024 remittance. The cumulative interest shortfalls for the trust totaled $8.3 million, up from $5.3 million at the last review in March 2023. To date, the trust incurred $13.1 million of losses, all of which have been contained to the nonrated class. Considering the deterioration in the credit support and propensity for interest shortfalls, the credit rating downgrades as well as the credit rating confirmation on Class F at C (sf) are supported.

The largest loan, 735 Sixth Avenue (Prospectus ID#6; representing 51.9% of the pool), is secured by the 16,500-square-foot (sf) ground and mezzanine floor retail portion of a 40-story, multifamily building in the Chelsea neighborhood of Manhattan. The loan transferred to special servicing in March 2019 for payment default. Occupancy declined drastically because two major tenants, David’s Bridal (previously 65.5% of the net rentable area (NRA)) and T-Mobile (previously 15.2% of NRA), vacated the property at lease expiration in October 2018 and November 2018, respectively. The departure of these two tenants resulted in occupancy decreasing to 18.8%. According to the servicer, the asset became real estate owned, effective June 2023, and is not currently being marketed for sale. The most recent appraisal, dated January 2023, reported an as-is value of $16.2 million, down 64.4% from the issuance value of $45.5 million. In its analysis, Morningstar DBRS liquated the loan, resulting in a loss severity exceeding 85%.

The second-largest loan, Spectrum Office Building (Prospectus ID#31; representing 17.0% of the pool), is secured by a 130,112-sf suburban Houston office property built in 1981. The loan transferred to special servicing in March 2023 for imminent monetary default. Performance for the property has struggled to rebound since the largest tenant at issuance, Consolidated Graphics, Inc. (28.2% of NRA), vacated at its December 2018 lease expiration. According to servicer reporting, the current occupancy rate is 65.0%, which has been dropping since issuance when occupancy was 85.9%. As a result, the loan has been reporting below breakeven debt service coverage ratios for the past several years. The most recent appraisal, dated June 2023, reported an as-is value of $7.7 million, down nearly 60% from the issuance value of $18.0 million. In its analysis, Morningstar DBRS liquidated the loan, resulting in a loss severity of approximately 50%.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (January 23, 2024) https://dbrs.morningstar.com/research/427030.

Class X-C 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798).

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

DBRS, Inc.
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The credit rating methodologies used in the analysis of this transaction can be found at:
https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0, https://dbrs.morningstar.com/research/428797

-- Rating North American CMBS Interest-Only Certificates (December 13, 2023), https://dbrs.morningstar.com/research/425261

-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023), https://dbrs.morningstar.com/research/420982

-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592

-- Legal Criteria for U.S. Structured Finance (December 7, 2023), https://dbrs.morningstar.com/research/425081

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.