DBRS, Inc. (DBRS Morningstar) confirmed its credit ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE10 issued by COMM 2013-CCRE10 Mortgage Trust as follows.
Class E at BB (sf)
Class F at B (low) (sf)
The trends are Stable.
Since DBRS Morningstar's last credit rating action, the pool has become very concentrated as 41 loans have been repaid from the pool, leaving just three outstanding. All three loans are past their scheduled maturity dates and are in special servicing. DBRS Morningstar's loss projections are driven primarily by the largest loan, Prince Kuhio Plaza (Prospectus ID #6, 77.6% of the pool). The combined current projected losses for all three assets would be contained to the unrated Class G certificate. DBRS Morningstar remains concerned with the timing of disposition of the outstanding loans and propensity for interest shortfalls. As of the September 2023 remittance, all three loans are categorized by the servicer as performing despite being past their respective maturity dates, and all classes received full interest payments.
The largest loan is Prince Kuhio Plaza, secured by a regional mall in Hilo, Hawaii, located on the northeast coast of the Big Island. The collateral anchor tenant Sears (16.4% of the net rentable area) vacated in April 2021, ahead of its December 2021 lease expiration. As a result, physical occupancy declined to 72.1%. Despite Sears' departure, cash management has not been triggered as the debt service coverage ratio (DSCR) remains above 1.60 times (x). The DSCR for YE2022 was 1.98x, down from 2.18x at YE2021 but relatively stable from issuance. The borrower, an affiliate of Brookfield, is actively marketing the space having been able to back-fill large vacancies in the past.
The loan transferred to special servicing in June 2023 and is now in maturity default having missed the July 2023 repayment date. According to recent commentary, a proposal to extend the maturity is being reviewed, though the process has been delayed as the property is encumbered by a ground lease expiring in 2042. The asset primarily serves shoppers local to the region, as it is located some distance from the main tourist areas on the island. It is the only enclosed regional mall on the Big Island, and for the trailing 12 month period ended May 31, 2023, reported in-line sales of approximately $480 per square foot (psf).
An updated appraisal has not yet been finalized, although DBRS Morningstar anticipates significant value decline from the issuance appraised value of $71.0 million, given the property's dated appearance, declining occupancy, and upcoming scheduled lease roll. In its analysis, DBRS Morningstar estimated liquidation scenarios based on haircuts between 50% and 60% of the issuance appraised value, with loss severities ranging between approximately 12% and 32%.
The second-largest loan is Eleven Five Eleven (Prospectus ID#43, 12.1% of the pool), backed by a suburban office property in Houston's West Katy Freeway submarket. The June 2023 rent roll indicates the property was 92% occupied; however, leases representing 39.5% of the NRA are already expired or scheduled to expire by YE2024. Submarket vacancy is high at 26.6% as of Q2 2023, according to Reis. The smallest loan is Starks Parking Louisville (Prospectus ID# 47, 10.3% of the pool), secured by a 725-space parking garage located in downtown Louisville, Kentucky. Performance was drastically affected by the Coronavirus Disease (COVID-19) pandemic, as demand for parking plummeted and monthly permits were cancelled. Both of these loans were transferred to special servicing in August 2023 for maturity default. There have been minimal updates from the special servicer regarding the workout strategies given the loans' recent transfer dates. In its analysis, DBRS Morningstar is projecting loss severities between 30% and 45% for these two assets, based on stresses to the issuance appraised values.
As noted above, DBRS Morningstar's projected losses imply recoveries that would sufficiently repay the rated bonds. Loss projections may increase should property values decline further than expected, or the loans languish in special servicing with servicer advances accumulating. DBRS Morningstar will continue to monitor the loans for developments.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/416784 (July 4, 2023).
All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).
Other methodologies referenced in this transaction are listed at the end of this press release.
The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
DBRS Morningstar notes that a sensitivity analysis was not performed for this review as the transaction is in wind-down, with only a few loans remaining. In those cases, the DBRS Morningstar credit ratings are typically based on a recoverability analysis for the remaining loans.
DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429
The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.
North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)
DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://www.dbrsmorningstar.com/research/420982)
North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)
Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)
Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
SEARS HOLDINGS CORPORATION 
