Approximately $1.17 billion of structured securities affected
New York, November 05, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on eight classes and downgraded the ratings on six
classes in Morgan Stanley Bank of America Merrill Lynch Trust 2013-C10,
Commercial Mortgage Pass-Through Certificates, Series 2013-C10
as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Jun
10, 2020 Affirmed Aaa (sf)
Cl. A-3FL, Affirmed Aaa (sf); previously on Jun
10, 2020 Affirmed Aaa (sf)
Cl. A-3FX, Affirmed Aaa (sf); previously on Jun
10, 2020 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jun
10, 2020 Affirmed Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on Jun
10, 2020 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jun
10, 2020 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Jun
10, 2020 Affirmed Aaa (sf)
Cl. B, Downgraded to A3 (sf); previously on Jun 10,
2020 Affirmed Aa3 (sf)
Cl. C, Downgraded to Ba1 (sf); previously on Jun 10,
2020 Downgraded to Baa1 (sf)
Cl. D, Downgraded to B3 (sf); previously on Jun 10,
2020 Downgraded to Ba2 (sf)
Cl. E, Downgraded to Caa2 (sf); previously on Jun 10,
2020 Downgraded to B1 (sf)
Cl. F, Downgraded to Ca (sf); previously on Jun 10,
2020 Downgraded to B3 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Jun 10, 2020 Affirmed Aaa (sf)
Cl. PST**, Downgraded to Baa1 (sf); previously
on Jun 10, 2020 Downgraded to A1 (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
RATINGS RATIONALE
The ratings on seven P&I classes were affirmed due to the classes'
significant credit support 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 five P&I classes were downgraded due to a decline in
pool performance and an increase in expected losses, driven primarily
by the significant share of specially serviced loans and the deal's
exposure to poorly performing regional malls. Specially serviced
loans now represent 26.7% of the pool and three regional
malls make up 19.3% of the pooled balance including Westfield
Citrus Park (10% of the pool); Southdale Center (7.1%
of the pool) and The Mall at Tuttle Crossing (2.2% of the
pool). Westfield Citrus Park and The Mall at Tuttle Crossing are
in special servicing and last made a debt service payment in April 2020.
Furthermore, the pool also contains a high exposure to hotel properties,
representing 16.6% of the pool.
The rating on the IO class was affirmed based on the credit quality of
its referenced classes.
The rating on the exchangeable class (PST) was downgraded due to the decline
in credit quality of its referenced exchangeable classes.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. 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.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Moody's rating action reflects a base expected loss of 13.0%
of the current pooled balance, compared to 7.7% at
Moody's last review. Moody's base expected loss plus realized
losses is now 11.1% of the original pooled balance,
compared to 6.6% 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 methodologies used in rating all classes except exchangeable classes
and interest-only classes were "Approach to Rating US and Canadian
Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778
and "Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579.
The principal methodology used in rating exchangeable classes was "Moody's
Approach to Rating Repackaged Securities" published in June 2020 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1230078.
The methodologies used in rating interest-only classes were "Approach
to Rating US and Canadian Conduit/Fusion CMBS" published in September
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778,
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579,
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 *) and exchangeable
classes (indicated by the **). Alternatively, please
see the Rating Methodologies page on www.moodys.com for
a copy of these methodologies.
DEAL PERFORMANCE
As of the October 19, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 15% to $1.26
billion from $1.49 billion at securitization. The
certificates are collateralized by 67 mortgage loans ranging in size from
less than 1% to 10% of the pool, with the top ten
loans (excluding defeasance) constituting 54% of the pool.
One loan, constituting 0.7% of the pool, is
secured by a residential cooperative building in Manhattan, NY and
has an investment-grade structured credit assessment of aaa (sca.pd).
Seven loans, constituting 14% 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 19,
the same as at Moody's last review.
As of the October 2020 remittance report, loans representing 73%
were current or within their grace period on their debt service payments,
1% were beyond their grace period but less than 30 days delinquent,
3% were between 30 -- 59 days delinquent, and
24% were greater than 90 days delinquent or in foreclosure.
Sixteen loans, constituting 21% of the pool, are on
the master servicer's watchlist, of which eight loans,
representing 6% of the pool, indicate the borrower has requested
relief in relation to coronavirus impact on the property. 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.
Six loans, constituting 27% of the pool, are currently
in special servicing. All of the specially serviced loans,
representing 27% of the pool, have transferred to special
servicing since May 2020. No loans have been liquidated from the
pool.
The largest specially serviced loan is the Westfield Citrus Park Loan
($126.4 million -- 10% of the pool),
which is secured by the borrower's fee simple interest in a 506,914
square foot (SF) portion of a 1.1 million SF regional mall located
in northwest Tampa, FL. The mall's current non-collateral
anchors include Dillard's, Macy's and J.C. Penney.
One tenant, Sear's (non-collateral), closed its location
in 2019 and the space remains vacant. J.C. Penney
declared chapter 11 bankruptcy in May 2020, however, this
location is not on their recently announced list of closures. The
largest collateral tenants include a 20-screen Regal Cinemas,
17% of the NRA with a lease expiration in 2024 and Dick's Sporting
Goods, 10% of NRA with a lease expiration in 2023.
The Regal Cinema movie theater has historically performed poorly,
generating sales of less than $300,000 per screen,
and the theater is currently closed as a result of business disruptions
from the pandemic. As of December 2019, the collateral was
81% leased, down from 92% leased the year prior.
Inline occupancy was approximately 80% as of August 2020.
Property performance has declined annually since 2015 primarily due to
declining revenues. The 2019 net operating income (NOI) declined
16% as compared to 2018 and is now 31% below the 2013 reported
NOI. Additionally, the property faces competition from International
Plaza and Westshore Plaza, both located 11 miles from the property.
The mall was temporarily closed as a result of the pandemic and re-opened
in late May. The loan transferred to special servicing in July
2020 due to imminent monetary default. Special servicer commentary
indicated rents are being captured through a cash trap and the sponsor,
Westfield, has indicated it will no longer support the asset and
is cooperating in a friendly foreclosure process. This loan has
amortized almost 14% since securitization and matures in June 2023.
The loan is last paid through its April 2020 payment date and based on
the declining performance, Moody's anticipates a significant
loss on this loan.
The second largest specially serviced loan is the Milford Plaza Fee Loan
($110 million -- 8.6% of the pool),
which represents a pari passu interest in a $275 million mortgage
loan. The loan is secured by the ground lease on the land beneath
the Row NYC Hotel, formerly the Milford Plaza Hotel --
a 28-story, 1,331 key full-service hotel located
in Midtown Manhattan, NY. The triple net (NNN) ground lease
commenced in 2013, expires in 2112 and includes annual CPI rent
increases. The tenant has purchase options at the end of years
10, 20 and 30. Moody's analysis considered the value of the
non-collateral improvements that the leased fee interest underlies
when assessing the risk of the loan, as the subject loan is senior
to any debt on the improvements. The loan transferred to special
servicing in June 2020 due to imminent default and is last paid through
its April 2020 payment date. The ground lessee defaulted on the
ground rent in April 2020. The lender is dual-tracking foreclosure
along with potential modification discussions. Due to the priority
of the leased fee position, the loan was included in the conduit
statistics below and Moody's LTV for the loan reflecting the value of
the land collateral is 120%.
The third largest specially serviced loan is the Hotel Oceana Santa Monica
Loan ($39.6 million -- 3.1%
of the pool), which is secured by a three-story, 70-key,
luxury boutique hotel located in Santa Monica, CA. Prior
to the pandemic, the hotel had recently completed extensive renovations
totaling approximately $31.5 million ($449,295
per key). The loan transferred to special servicing in June 2020
due to the borrower's request for coronavirus relief. The property
benefits from its coastal location with high barriers to entry and recently
completed a full renovation. The loan is paid through its September
2020 payment date and the borrower and lender are continuing potential
loan modification discussions.
The fourth largest specially serviced loan is the Summerhill Square Loan
($29.4 million -- 2.3% of the
pool), which is secured by a 125,862 SF retail property located
in East Brunswick, NJ. The property was previously impacted
by the bankruptcy and departure of Toys R Us in June 2018 which caused
the occupancy to decline to 49%. A new lease was subsequently
executed with Rock N Air (51% of NRA), a sponsor affiliate.
However, the tenant has not been able to open for business as a
result of the pandemic. The fourth largest tenant, Pier 1
(6.8% of NRA), announced closures of all its stores
as a result of its bankruptcy filing. The property was approximately
91% leased as of April 2020 (41% excluding Rock N Air and
Pier 1). The loan is paid through its May 2020 payment date.
The special servicer has indicated loan modifications are being discussed
and foreclosure has also been filed.
The fifth largest specially serviced loan is the Mall at Tuttle Crossing
($27.4 million -- 2.2% of the
pool), which represents a pari-passu portion of a $114.2
million mortgage loan. The loan is secured by a 385,000 SF
component of an approximately 1.1 million SF super-regional
mall located in Dublin, Ohio approximately 17 miles northwest of
Columbus. The mall is currently anchored by JC Penney, Scene
75 and Macy's (all three of which are non-collateral). Scene
75, an indoor entertainment center, backfilled the former
Macy's Home Store (20% of total mall NRA) that closed in 2017.
The mall currently has one non-collateral vacant anchor space,
a former Sears (149,000 SF), that vacated in early 2019.
The collateral portion was 70% leased as of April 2020, compared
to 76% leased as of June 2019 and 88% in December 2015.
The mall has suffered from declining in-line occupancy which dropped
to 64% in April 2020, compared to 71% in June 2019
and 82% in December 2017. Due to declining revenues,
the property's annual NOI had declined significantly in both 2019 and
2018. The 2019 NOI was nearly 26% lower than underwritten
levels. The loan sponsor, Simon Property Group, has
classified this mall under their "Other Properties" and the loan transferred
to special servicing in July 2020 for imminent monetary payment default.
Special servicer commentary indicated legal counsel has been engaged and
enforcement options are being evaluated. The loan is paid through
its April 2020 payment date, has amortized almost 9% since
securitization and matures in May 2023.
The remaining specially serviced loan is secured by a boutique hotel property
in Los Angeles, CA which has been impacted by business disruptions
resulting from the pandemic. Moody's has also assumed a high
default probability for one poorly performing loan, constituting
1% of the pool. The troubled loan is secured by a retail
property located in the Bronx, NY which has suffered from tenant
departures and bankruptcies. Moody's has estimated an aggregate
loss of $118.2 million (a 50% expected loss on average)
from these specially serviced and troubled loans.
Moody's received full year 2019 operating results for 100% of the
pool, and partial year 2020 operating results for 84% of
the pool (excluding five of the six specially serviced loans and defeased
loans). Moody's weighted average conduit LTV is 108%,
compared to 107% at Moody's last review. Moody's
conduit component excludes loans with structured credit assessments,
defeased and CTL loans, and specially serviced (with the exception
of the Milford Plaza Fee loan which is included in the conduit statistics)
and troubled loans. Moody's net cash flow (NCF) reflects
a weighted average haircut of 19% to the most recently available
net operating income (NOI). Moody's value reflects a weighted
average capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 1.68X and 1.03X,
respectively, the same as 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 20% of the pool balance.
The largest loan is the 500 North Capitol Loan ($105 million --
8.3% of the pool), which is secured by a 233,000
SF, Class A office building located in downtown Washington,
DC. As of June 2020, the property was 99% leased,
compared to 98% at year-end 2019, 93% in December
2015 and 85% at securitization. The largest tenant at the
property, McDermott Will & Emery LLP, comprises over 80%
of the net rentable area (NRA) and has a lease expiration in September
2027. Due to the single tenant concentration, Moody's utilized
a lit/dark analysis. This loan is interest-only throughout
the loan term and Moody's LTV and stressed DSCR are 117% and 0.91X,
respectively, the same as at Moody's last review.
The second largest loan is the Southdale Center Loan ($89.5
million -- 7.1% of the pool), which
represents a pari-passu interest in a $138.7 million
mortgage loan. The loan is secured by a 635,000 SF component
of a 1.23 million SF super-regional mall located in Edina,
MN., approximately 9 miles south of Minneapolis. While
the property is located only six miles away from the Mall of America,
the property serves local consumers, while the Mall of America is
considered to be a tourist shopping destination. The mall is currently
anchored by a Macy's (non-collateral) and a 12-screen American
Multi-Cinema movie theater. The property has experienced
multiple big box closures including Herberger's (143,608 SF) in
August 2018, and JC Penney (non-collateral) and Gordmans
(44,087 SF) in 2017. As of June 2020, the collateral
portion and inline occupancy were 54% and 73%, respectively.
The property is owned and managed by Simon Property Group. The
former JC Penney space was backfilled by a 200,000 SF LifeTime Fitness
& Lifetime Work, which opened in December 2019 along with two
new restaurants. The property's historical NOI improved significantly
through 2017, however, due to declining revenues, the
property's NOI declined annually in both 2018 and 2019. As of February
2020, the borrower stated they are still exploring options regarding
the former Herberger's and Gordmans' spaces. The loan
has amortized over 10% since securitization and remains current
on debt service. Moody's LTV and stressed DSCR are 131%
and 0.84X, respectively, compared to 126% and
0.84X at Moody's last review.
The third largest loan is the Pot-Nets Bayside MHC Loan ($58.4
million -- 4.6% of the pool), which
is secured by a 1,518-pad MHC located in Long Neck,
DE. The property is located along Indian River Bay, which
connects to Rehoboth Bay to the north and the Atlantic Ocean to the east.
The community was built in 1962 and was later expanded in 2007.
All of the pads are improved with occupant-owned model homes.
The property is part of the larger Pot-Nets development,
which is comprised of six neighboring communities, all of which
were developed by the Tunnell family. All six Pot-Nets communities,
totaling over 3,200 sites, share amenities amongst one another.
The property was 70% occupied as of March 2020, compared
to 75% at securitization. Property performance has improved
since securitization due to higher rental revenues and the loan has amortized
14%. Moody's LTV and stressed DSCR are 91% and 1.11X,
respectively, compared to 92% and 1.09X at the 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 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.
Fred Kasimov
Associate Lead 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
