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Rating Action:

Moody's Affirms Twelve and Downgrades Four Classes of COMM 2013-CCRE7

Global Credit Research - 07 Apr 2017

Approximately $822 Million of Structured Securities Affected

New York, April 07, 2017 -- Moody's Investors Service has affirmed the ratings of twelve classes and downgraded the ratings of four classes in COMM 2013-CCRE7 Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE7 as follows:

Cl. A-2, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. A-3, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. A-3FL, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. A-3FX, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. A-4, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. A-SB, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. A-M, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. B, Affirmed Aa3 (sf); previously on Mar 31, 2016 Affirmed Aa3 (sf)

Cl. C, Affirmed A3 (sf); previously on Mar 31, 2016 Affirmed A3 (sf)

Cl. D, Downgraded to Ba2 (sf); previously on Mar 31, 2016 Affirmed Baa3 (sf)

Cl. E, Downgraded to B1 (sf); previously on Mar 31, 2016 Affirmed Ba2 (sf)

Cl. F, Downgraded to B2 (sf); previously on Mar 31, 2016 Affirmed Ba3 (sf)

Cl. G, Downgraded to Caa1 (sf); previously on Mar 31, 2016 Affirmed B2 (sf)

Cl. PEZ, Affirmed A1 (sf); previously on Mar 31, 2016 Affirmed A1 (sf)

Cl. X-A, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. X-B, Affirmed A2 (sf); previously on Mar 31, 2016 Affirmed A2 (sf)

RATINGS RATIONALE

The ratings on nine P&I Classes were affirmed because 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), are within acceptable ranges.

The ratings on four P&I Classes, Classes D, E, F and G, were downgraded due to higher anticipated losses from specially serviced and troubled loans.

The transaction contains exchangeable certificates. Classes A-M, B and C may be exchanged for Class PEZ certificates. The PEZ certificates will be entitled to receive the sum of interest and principal distributable on the Classes A-M, B and C certificates that are exchanged for such PEZ certificates. The rating on Class PEZ was affirmed based on the weighted average rating factor (WARF) of the exchangeable classes.

The ratings on two interest only (IO) Classes, Classes X-A and X-B, were affirmed based on the credit performance (or WARF) of their referenced classes.

Moody's rating action reflects a base expected loss of 6.3% of the current balance, compared to 3.0% at Moody's last review. Moody's base expected loss plus realized losses is now 5.7% of the original pooled balance, compared to 2.9% at Moody's 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 methodologies used in these ratings were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in December 2014 and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in October 2015. The methodology used in rating the exchangeable class, Cl. PEZ was "Moody's Approach to Rating Repackaged Securities" methodology published in June 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Additionally, the methodology used in rating Cl. X-A and X-B was "Moody's Approach to Rating Structured Finance Interest-Only Securities" methodology published in October 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Please note that on February 27, 2017, Moody's released a "Request for Comment" in which it has requested market feedback on proposed changes to its methodology for rating structured finance interest-only (IO) securities called "Moody's Approach to Rating Structured Finance Interest-Only Securities," dated October 20, 2015. If Moody's adopts the new methodology as proposed, the changes could affect the ratings of COMM 2013-CCRE7, Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE7. Please see "Moody's Proposes Revised Approach to Rating Structured Finance Interest-Only (IO) Securities", which is available at www.moodys.com, for more information about the implications of the proposed changes to the methodology on Moody's ratings.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model, which it uses for both conduit and fusion transactions. Credit enhancement levels for conduit loans are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Moody's fuses the conduit results with the results of its analysis of investment grade structured credit assessed loans and any conduit loan that represents 10% or greater of the current pool balance.

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 . The pool has a Herf of 19, compared to 21 at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

DEAL PERFORMANCE

As of the March 10, 2017 distribution date, the transaction's aggregate certificate balance has decreased by 9% to $855 million from $936 million at securitization. The certificates are collateralized by 57 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top ten loans constituting 57% of the pool. Three loans, constituting 1.4% of the pool, have defeased and are secured by US Government securities.

Four loans, constituting 8.0% 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.

No loans have been liquidated from the pool since securitization. There are currently four loans, constituting 7.2% of the pool, in special servicing. The largest specially serviced loan is One West Fourth Street ($48.3 million -- 5.6% of the pool), which is secured by a 431,000 SF Class A office property located in Winston-Salem, NC approximately 28 miles west of Greensboro. The loan transferred to special servicing in November 2016 due to imminent default when the largest tenant, Wells Fargo (representing 46% NRA) announced it will be vacating at its lease expiration in December 2016. Monthly debt service payments remain current, however, cash flow is expected to significantly decline in 2017 due the decreased occupancy.

The remaining loans in special servicing (totaling $15.2 million -- 1.6% of the pool), represent three cross-collateralized loans secured by select-service hotels within the Bakken Formation of North Dakota. The hotels, which include two Microtel hotels and one Hampton Inn & Suites, total 254 keys and are located in Williston (two properties) and Dickinson (one property), North Dakota. The performance of the hotels have suffered from declining occupancy and average daily rates as a result of the downturn in the North Dakota oil industry.

Moody's has also assumed a high default probability for two poorly performing loans, constituting 1.6% of the pool, and has estimated an aggregate loss of 23.6 million loss (31.3% expected loss on average) from these specially serviced and troubled loans.

Moody's received full year 2015 operating results for 99% of the pool. Moody's weighted average conduit LTV is 96.2%, compared to 94.6% 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 21% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.0%.

Moody's actual and stressed conduit DSCRs are 1.68X and 1.17X, respectively, compared to 1.72X and 1.17X 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.

The top three conduit loans represent 29.4% of the pool balance. The largest loan is the Moffett Towers Phase II Loan ($130.0 million -- 15.2% of the pool), which represents a pari passu portion of a $245 million senior mortgage loan. The loan is also encumbered with mezzanine debt of $29.8 million. The loan is secured by a 676,598 SF office property located in Silicon Valley office market of Sunnyvale, CA. The property consists of three separate LEED Gold certified eight-story office buildings. As of September 2016 the Property was 100% leased, unchanged since Moody's last review. The two tenants occupying the properties are Hewlett Packard (58% of NRA) and a subsidiary of Amazon.com, Inc. (42% of NRA). Moody's LTV and stressed DSCR are 107% and 0.94X, respectively, the same as at the last review.

The second largest loan is the Lakeland Square Mall Loan ($65.2 million -- 7.6% of the pool), which is secured by a 535,937 SF component of a 883,290 SF regional mall located in Lakeland, Florida approximately 35 miles east of Tampa. The property is anchored by Dillard's, J.C. Penney, Macy's and Sears. Only J.C. Penney is contributed as collateral for this loan. Junior anchors include Burlington Coat Factory and Cinemark Movie Theaters. Macy's has previously announced its plan to close this location and Sports Authority vacated its space in late 2016 after filing bankruptcy earlier in the year. As of September 2016, the total mall and inline space were 89% and 84% leased, respectively. Moody's analysis incorporates the potential volatility concerns of B-Malls which have historically exhibited higher cash flow volatility. Moody's LTV and stressed DSCR are 123% and 0.92X, respectively, compared to 100% and 1.11X at last review.

The third largest loan is the Larkspur Landing Hotel Portfolio Loan ($56.2 million -- 6.6% of the pool), which represents a pari passu portion of a $131 million senior mortgage loan. The loan is secured by 11 cross-collateralized and cross-defaulted extended-stay (all suite) hotels located within the metropolitan areas of San Francisco (5 properties), Sacramento (3), Seattle, (2) and Portland (1). The hotels contain a total of 1,277 rooms and were constructed between 1997 and 2000. The portfolio's performance has improved due to higher revenues. Moody's LTV and stressed DSCR are 80.1% and 1.45X, respectively, compared to 81.6% and 1.42X at last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

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 or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Tulay Sangiray
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Matthew Halpern
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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