Press Release|CMBS
KBRA Affirms All Ratings for WFCM 2013-LC12
1 May 2024 | New York
KBRA affirms all of its outstanding ratings for WFCM 2013-LC12, a $267.3 million CMBS conduit transaction. The affirmations follow a surveillance review of the transaction and are based on the performance and expected losses of the transaction's remaining seven loans, which have not meaningfully changed since KBRA’s last ratings change in May 2023. In addition, the ratings considered the likelihood of interest shortfalls on the rated classes as the servicer works through the resolution of the assets. As of the April 2024 remittance period, four assets (85.8%) are specially serviced, including two performing matured balloon loans (57.8%), one REO asset (25.8%), and one loan in foreclosure (2.2%). KBRA identified five K-LOCs (95.2%), including the specially serviced assets. The details of the K-LOCs are outlined below.
White Marsh Mall (largest, 29.4%, Performing Matured Balloon)
- The loan is collateralized by a 702,317 sf portion of a 1.2 million sf regional mall located 12 miles north of downtown Baltimore, Maryland. Non-collateral anchors at the mall include JCPenney and Macy's, while Macy's Home Store and Boscov's are collateral anchors. The mall’s fourth anchor box formerly occupied by Sears (non-collateral), remains vacant since its store closure in 2020. The loan sponsor is Brookfield Property Partners L.P.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to its status with the special servicer following the loan's failure to pay off at its May 2021 maturity date. In addition, financial performance has exhibited a deterioration since securitization, primarily driven by a decrease in base rents. The loan transferred to the special servicer in August 2020 for imminent monetary default due to hardships stemming from COVID-19 and has remained there ever since with no indications of receiving any modification. February 2023 special servicer commentary indicated that the lender and obligors executed a stipulated receivership order in January 2023. According to the mall’s website, the collateral is currently leased and managed by Spinoso Real Estate Group. The loan is reported as current on payments.
- The servicer-reported occupancies and DSCs are: 87.0% / 1.76x (FY 2022), 93.0% / 1.41x (FY 2021); at closing these were 96.6% / 2.66x. An appraisal dated August 2023 valued the property at $95.0 million ($135 per sf), which is 68.3% below the $300.0 million ($427 per sf) value at issuance. As a result, the asset carries an ARA of $35.7 million, resulting in a cumulative ASER of $1.4 million. KBRA's analysis resulted in an estimated loss of $91.9 million (49.2% estimated loss severity) on the whole loan balance of $186.9 million.
Carolina Place (2nd largest, 28.4%, Performing Matured Balloon)
- The loan is collateralized by a 647,511 sf portion of a 1.2 million sf super-regional mall located in Pineville, North Carolina, approximately ten miles south of the Charlotte CBD. The mall is currently anchored by Belk, Dillard's, and JCPenney, of which only JCPenney is collateral for the loan. JCPenney occupies its space subject to a lease expiring in May 2028. Since last review, the previously vacant Sears store, which is loan collateral, was leased to Southern Lion, a home décor market with over 100 tenants. The mall was also previously anchored by Macy's, which sold its store to the loan sponsor in 2017. The former Macy's store was subsequently leased to Dick's Sporting Goods. The loan sponsor is Brookfield Property Partners L.P.
- KBRA maintains the loan’s K-LOC designation and its KPO of Underperform due to its maturity default and performing matured balloon status. The loan was transferred to the special servicer for maturity default during the June 2023 remittance period. In January 2024, the special servicer and borrower executed a forbearance agreement that expires in June 2025.
- For the TTM period ended June 2023, comparable in-line tenants with less than 10,000 sf generated sales of $476 per sf, representing a 15.8% increase from issuance ($411 per sf). For the same period, JCPenney reported sales of $55 per sf, a 64.9% decrease from issuance ($157 per sf).
- The servicer-reported occupancies and DSCs are: 73.0% / 1.56x (FY 2023), 75.0% / 1.48x (FY 2022); at closing these were 94.0% / 1.71x. An appraisal dated February 2024 valued the property at $128.6 million ($198 per sf), which is 51.1% below the $263.0 million ($406 per sf) value at issuance. KBRA’s analysis resulted in an estimated loss of $47.3 million (32.9% estimated loss severity) on the whole loan balance of $147.4 million.
Rimrock Mall (3rd largest, 25.8%, REO)
- The asset consists of a 428,661 sf portion of a 586,446 sf regional mall located in Billings, Montana. Mall anchors include two Dillard’s anchor spaces, along with JCPenney, the latter of which is collateral for the loan.
- KBRA maintains the asset’s K-LOC designation and KPO of Underperform due to its REO status. The property has experienced declining occupancy and performance in recent years, in part due to the closure of Herberger’s in 2018. The asset became REO in January 2022. The asset was previously sponsored by Starwood Capital Group, L.P. According to the special servicer, the trust plans to sell the asset in Q4 2024.
- The servicer-reported occupancies and DSCs are: 79.0% / 0.90x (YTD June 2023), 87.0% / 0.59x (FY 2020); at closing these were 97.0% / 1.70x. An appraisal dated September 2023 valued the property at $36.4 million ($85 per sf), which is 67.5% below the $112.0 million ($261 per sf) value at issuance. As a result, the asset carries an ARA of $43.4 million, resulting in a cumulative ASER of $5.6 million. KBRA's analysis resulted in an estimated loss of $50.5 million (73.2% estimated loss severity).
Queens Tower (4th largest, 9.4%)
- The loan is collateralized by a 175,459 sf office property located in the Jamaica neighborhood of Queens, New York. The property’s largest tenant is NYC Department of Citywide Administrative Services, which leases 54.4% of the property’s square footage through November 2026.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to the loan’s previous maturity default in 2023. The loan was subsequently modified and extended for 12 months through June 2024. The loan is currently on the master servicer’s watchlist for its upcoming maturity. The borrower is researching refinancing options.
- The servicer-reported occupancies and DSCs are: 89.0% / 2.06x (YTD September 2023), 89.0% / 2.12x (FY 2022); at closing these were 98.0% / 1.99x. KBRA's analysis resulted in an estimated loss given default of $1.7 million (6.8% estimated loss severity).
Hotel Vetiver (6th largest, 2.2%, Foreclosure)
- The loan is collateralized by a 62-key limited-service hotel located in Long Island City, New York, approximately four miles east of Manhattan and eight miles north of downtown Brooklyn.
- KBRA maintains the loan’s K-LOC designation and assigned a KPO of Underperform to the loan due to its foreclosure status. The loan was transferred to the special servicer in May 2020 due to delinquency and a receiver was put in place in November 2021. According to the special servicer, a new mortgage was found during foreclosure litigation, and the court ruled that this could be added to the complaint. Foreclosure litigation remains ongoing.
- The servicer-reported occupancies and DSCs are: N/A / -0.34x (YTD June 2023), N/A / -0.39x (FY 2022); at closing these were 85.0% / 1.80x. KBRA's analysis resulted in an estimated loss of $4.2 million (71.4% estimated loss severity).
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as, the magnitude and extent of interest shortfalls, if any, on the certificates.
To access rating and relevant documents, click here.