Press Release|CMBS
KBRA Affirms All Ratings for GSMS 2013-GC13
3 May 2024 | New York
KBRA affirms all ratings of GSMS 2013-GC13, a $352.3 million CMBS conduit transaction. The affirmations reflect estimated losses for the remaining five assets that are mostly in line with our last rating change in May 2021. All remaining loans maintain K-LOC designations, of which two are with the special servicer (27.2%) and three have been modified and extended (72.8%). Four K-LOCs (80.1%) have estimated losses. In addition, the ratings reflect the likelihood of interest shortfalls reaching higher into the capital structure as the servicer works through the resolution of the assets. The details of the assets are outlined below.
Mall St. Matthews (largest, 29.6%, K-LOC)
- The loan is collateralized by 670,376 sf of a 1.0 million sf, single-level regional mall located in Louisville, Kentucky, approximately seven miles east of the city’s CBD. The property, which is owned and operated by Brookfield Property Partners, has three anchors, Dillard’s, Dillard’s Men’s & Home, and JCPenney. Dillard’s owns its stores and the underlying land and JCPenney owns its improvements subject to a ground lease with the sponsor.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on a loan modification that was signed in March 2022 converting the loan to interest-only payments and extending its maturity until June 2025. The modification included a $7.0 million contribution of new capital from the borrower along with cash management going towards the reduction of the outstanding principal of the loan. The loan is also subject to a capital event waterfall that upon loan pay off would result in a minimum balance of $75.0 million to be repaid to the lender followed by additional capital event tiers between the lender and borrower.
- According to the September 2023 rent roll, the subject property was 91.2% leased compared to 94.0% at last review and 95.8% at closing. Tenant rollover risk remains a concern as lease rollover exceeds 10.0% of base rent in MTM/2024 (29.8%), 2026 (15.4%), 2027 (10.4%) and 2028 (14.5%). There are currently 32 tenants, representing 29.8% of base rent, on MTM leases or which have leases expiring in 2024. For the TTM period ending September 2023, comparable in-line tenants occupying less than 10,000 sf generated sales of $486 per sf, representing a 4.2% decline from last review ($507 per sf) and a 20.0% increase from securitization ($405 per sf).
- The servicer-reported occupancies and DSCs are: 94.0% / 1.51x (FY 2023); 93.0% / 1.59x (FY 2022); at closing these were 96.0% / 1.96x. An appraisal dated August 2021 valued the asset at $83.0 million ($124 per sf), which is 70.4% below the $280.0 million ($418 per sf) value at issuance. KBRA’s analysis resulted in an estimated loss of $55.1 million on a whole loan balance of $132.7 million (41.5% estimated loss severity).
Plaza America Towers III & IV (2nd largest, 23.3%, K-LOC)
- The loan is collateralized by two Class-A office towers totaling 469,071 sf that are located in Reston, Virginia, approximately 20 miles northwest of Washington, DC.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on declining collateral performance and the borrower’s failure to pay off the loan at maturity. An extension was executed for both the senior and non-trust mezzanine debt until July 2025.
- According to the March 2023 rent roll, the subject property was 85.3%, in line with last review, but down from 94.6% at closing; however, occupancy further declined to 79.7% following the departure of the former fifth largest, Harness, Dickey & Pierce, LLC (7.1% of base rent at last review). Tenant rollover risk remains a concern as lease rollover exceeds 10.0% of base rent in MTM/2024 (11.3%), 2025 (43.7%) and 2027 (15.0%).
- The servicer-reported occupancies and DSCs are: 85.0% / 1.26x (FY 2022); 85.0% / 1.18x (FY 2021); at closing these were 95.0% / 1.56x. KBRA’s analysis resulted in an estimated loss of $9.8 million on the $82.0 million loan balance (12.0% estimated loss severity).
Crossroads Center (3rd largest, 22.7%, Specially Serviced)
- The loan is collateralized by a 766,213 sf portion of Crossroads Center, an 895,488 sf, single-level regional mall located in St. Cloud, Minnesota, approximately 65 miles northwest of the Minneapolis CBD. The sponsor is Brookfield Property Partners. The mall is anchored by JCPenney, Macy’s, Scheels, and Target. Target owns its store and the underlying land and is not part of the loan collateral.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on its status with the special servicer, delinquency, and the borrower’s failure to pay off the loan at its scheduled April 2023 maturity. A modification was proposed in October 2022 but the borrower refused to contribute additional equity into the property and a receiver was appointed. The special servicer commentary indicates the receiver has sold the property and an assumption of the loan is being worked on.
- According to the June 2023 rent roll, the subject property was 85.0% leased compared to 84.7% at last review and 96.0% at closing. Tenant rollover risk remains a concern as lease rollover exceeds 10.0% of base rent in MTM/2024 (33.2%), 2025 (17.9%), 2026 (16.0%) and 2029 (17.3%). There are currently 36 tenants, representing 33.2% of base rent, on MTM leases or have leases expiring in 2024. For the TTM period ending June 2023 comparable in-line tenants occupying less than 10,000 sf generated sales of $392 per sf, representing a 6.4% and 2.2% decline from last review ($419 per sf) and securitization ($401 per sf), respectively.
- The servicer-reported occupancies and DSCs are: 87.0% / 1.11x (YTD June 2023); 87.0% / 1.20x (FY 2021); at closing these were 96.0% / 1.89x. An appraisal dated September 2023 valued the asset at $53.0 million ($69 per sf), which is 67.9% below the $165.0 million ($215 per sf) value at issuance. As a result, the asset carries an ARA of $35.4 million, resulting in a cumulative ASER of $721,209. KBRA’s analysis resulted in an estimated loss of $45.4 million on the $79.9 million loan balance (56.8% estimated loss severity).
Holiday Inn - 6th Avenue (4th largest, 19.9%, K-LOC)
- The loan is collateralized by a 24-story, 226-key, full-service hotel located in New York City. The collateral is located in the Chelsea neighborhood of Manhattan six blocks from Madison Square Garden and Penn Station.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on declining collateral performance and the borrower’s failure to pay off the loan at its June 2023 maturity. In May 2022, the subject was sold for $80.3 million ($355,310 per key) and the loan was assumed by Brookfield Asset Management. The lender granted a maturity extension until June 2025 to give the borrower time to complete ongoing PIP work.
- The special servicer obtained an updated January 2022 appraisal, which valued the property at $81.4 million ($360,177/key), a 28.3% decrease from issuance. The servicer-reported occupancies and DSCs are: 77.0% / 0.67x (YTD Sept 2023); 83.0% / 0.97x (FY 2022); at closing these were 91.0% / 1.79x. At this time, KBRA does not estimate a loss on the asset.
643-647 Ninth Avenue (5th largest, 4.5%, REO)
- The asset is collateralized by a mixed-use property composed of 21 multifamily units and 9,337 sf of retail space located in New York, New York.
- KBRA maintains the asset's K-LOC designation based its REO status. The loan transferred to the special servicer during the June 2020 remittance for maturity default. The title was taken in January 2023. The retail space has been vacant since 2020. While the mixed-use property also generates revenue from the 21 multifamily units, the loss of the commercial retail revenue resulted in a decline in financial performance and the DSCR fell below breakeven. According to the January 2024 rent roll, the property is 75.0% leased.
- The servicer-reported occupancies and DSCs are: 77.0% / 0.72x (FY 2023); 96.0% / 1.27x (FY 2019); at closing these were 100% / 1.78x. An appraisal dated May 2023 valued the asset at $18.6 million, which is 29.5% below the $26.4 million value at issuance. As a result, the asset carries an ARA of $2.8 million, resulting in a cumulative ASER of $424,526. KBRA’s analysis resulted in an estimated loss of $5.9 million on the $16.0 million loan balance (36.9% 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.