Rating Action: Moody's affirms nine and confirms two classes of WFRBS 2013-C13
Global Credit Research - 06 Jul 2020
Approximately $656 million of structured securities affected
New York, July 06, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on nine classes and confirmed the ratings on two classes in WFRBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2013-C13 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Jul 22, 2019 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jul 22, 2019 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Jul 22, 2019 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jul 22, 2019 Affirmed Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Jul 22, 2019 Affirmed Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Jul 22, 2019 Affirmed A3 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Jul 22, 2019 Affirmed Baa3 (sf)
Cl. E, Confirmed at Ba2 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Confirmed at B2 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade
Cl. X-A*, Affirmed Aaa (sf); previously on Jul 22, 2019 Affirmed Aaa (sf)
Cl. X-B*, Affirmed A2 (sf); previously on Jul 22, 2019 Affirmed A2 (sf)
* Reflects interest-only classes
The ratings on seven P&I classes were affirmed and the ratings on two P&I classes were confirmed due to the pool's share of defeasance and the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), being within acceptable ranges.
The ratings on the IO classes were affirmed based on the credit quality of the referenced classes.
The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.
Moody's rating action reflects a base expected loss of 2.2% of the current pooled balance, compared to 1.5% at Moody's last review. Moody's base expected loss plus realized losses is now 1.7% of the original pooled balance, compared to 1.2% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except interest-only classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
As of the June 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 22% to $682 million from $877 million at securitization. The certificates are collateralized by 83 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans (excluding defeasance) constituting 39% of the pool. Eighteen loans, constituting 6.8% of the pool, have investment-grade structured credit assessments. Ten loans, constituting 22.1% of the pool, have defeased and are secured by US government securities.
Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 21, compared to 25 at Moody's last review.
As of the June 2020 remittance report, loans representing 93% were current or within their grace period on their debt service payments, 3% were beyond their grace period but less than 30 days delinquent and 2% were between 30 -- 59 days delinquent.
Nineteen loans, constituting 12.6% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.
There have been no loans liquidated from the pool. One loan, constituting less than 1% of the pool, is currently in special servicing. The specially serviced loan is the Staybridge Suites Stafford loan ($5.9 million), which is secured by a 90-room extended stay hotel in Stafford, Texas. The loan had been on the watchlist since May 2019 for low DSCR as a result of the property's declining average daily rate (ADR). The loan transferred to special servicing in May 2020 for imminent default due to the fallout of the coronavirus pandemic and is last paid through its May 2020 payment date.
Moody's has also assumed a high default probability for two poorly performing loans, constituting 1.6% of the pool, both of which are backed by underperforming hotel properties. Moody's has estimated an aggregate loss of $3.8 million (an 23% expected loss based on a 82% probability default) from the specially serviced and troubled loans.
Moody's received full year 2019 operating results for 95% of the pool, and full or partial year 2020 operating results for 91% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 87%, essentially the same as at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 17.7% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.6%.
Moody's actual and stressed conduit DSCRs are 1.96X and 1.26X, respectively, compared to 1.92X and 1.25X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.
There are 18 loans with structured credit assessments ($46.3 million -- 6.8% of the pool) that are secured by multifamily cooperative properties located in New Jersey and New York.
The top three conduit loans represent 23.7% of the pool balance. The largest loan is the 301 South College Street Loan ($81.9 million -- 12.0% of the pool), which represents a pari passu interest in a $168.6 million mortgage loan. The loan is secured by a 988,646 square foot Class A office tower located in the central business district of Charlotte, North Carolina. The property was 99% leased as of March 2020, down from 100% at the prior review. The largest tenant, Wells Fargo, represents 69% of the net rentable are (NRA) and has a lease expiration date in December 2021. Wells Fargo announced plans to lease space at a nearby building and to reduce its space at this property. The next largest tenants include Womble Carlyle (6% of NRA; lease expiration June 2028) and YMCA (4% of NRA; lease expiration January 2022). Moody's has accounted for the tenant concentration risk of the largest tenant by utilizing a lit-dark analysis. After an initial 5-year interest only period the loan has now amortized 3.7% since securitization. Moody's LTV and stressed DSCR are 108% and 1.02X, respectively, compared to 102% and 1.00X at the last review.
The second largest loan is the General Services Administration (GSA) Portfolio Loan ($50 million -- 7.3% of the pool). The loan is secured by 14 cross-collateralized and cross-defaulted office and flex warehouse buildings totaling approximately 341,000 SF and located throughout 11 states. The loan sponsor is GSA Realty Holdings, Inc. The properties are collectively 100% leased to GSA tenants under 14 long-term leases, with only 19% of the NRA expiring prior to January 2023. The loan is interest only for its entire term and Moody's LTV and stressed DSCR are 89% and 1.13X, respectively, the same as at last review.
The third largest loan is the 825-845 Lincoln Road Loan ($30 million -- 4.4% of the pool). The loan is secured by a 38,843 SF retail property located in Lincoln Road Mall, an eight-block retail corridor within walking distance from the Atlantic Ocean and some of South Beach's high end hotels, including the Ritz-Carlton, The Delano, and The Shore Club. As of March 2020, the property was 100% leased to six tenants, including CB2 (15,200 SF, 39% of the NRA), Urban Outfitters (13,126 SF, 34% of the NRA), and American Eagle (4,500 SF, 12% of the NRA). The Urban Outfitters space serves as a flagship store for the retailer and the earliest expiration date amongst the three largest tenants is in August 2023. Property performance has improved since securitization due to higher rental revenues and the loan was current as its June 2020 remittance date. The loan is interest only for its entire term and Moody's LTV and stressed DSCR are 71% and 1.26X.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Rhett Terrell Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Matthew Halpern VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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