Approximately $537 million of structured securities affected
New York, November 01, 2022 — Moody’s Investors Service, (“Moody’s”) has affirmed the ratings on six classes and downgraded the ratings on four classes in JPMBB Commercial Mortgage Securities Trust 2013-C14, Commercial Mortgage Pass-Through Certificates, Series 2013-C14 as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Feb 17, 2021 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Feb 17, 2021 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Feb 17, 2021 Affirmed Aaa (sf)
Cl. B, Downgraded to A2 (sf); previously on Feb 17, 2021 Downgraded to A1 (sf)
Cl. C, Downgraded to Ba2 (sf); previously on Feb 17, 2021 Downgraded to Ba1 (sf)
Cl. D, Downgraded to Caa1 (sf); previously on Feb 17, 2021 Downgraded to B3 (sf)
Cl. E, Downgraded to Caa2 (sf); previously on Feb 17, 2021 Downgraded to Caa1 (sf)
Cl. F, Affirmed Caa3 (sf); previously on Feb 17, 2021 Downgraded to Caa3 (sf)
Cl. G, Affirmed C (sf); previously on Feb 17, 2021 Downgraded to C (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Feb 17, 2021 Affirmed Aaa (sf)
*Reflects interest-only (IO) class
RATINGS RATIONALE
The ratings on three principal and interest (P&I) classes, Cl. A-4, Cl. A-SB, and Cl. A-S, were affirmed because of their significant credit support and the transaction’s key metrics, including Moody’s loan-to-value (LTV) ratio and Moody’s stressed debt service coverage ratio (DSCR) are within acceptable ranges. These classes will also benefit from principal paydowns and amortization as the remaining loans approach their maturity dates and defeased loans now represent 47% of the pool.
The ratings on four P&I classes, Cl. B, Cl. C, Cl. D, and Cl. E, were downgraded due to potential higher losses and interest shortfall risks from the significant exposure to specially serviced loans (27% of the pool) and the potential refinance challenges for poorly performing loans with upcoming maturity dates. The two largest specially serviced loans (representing 26% of the pool) are secured by regional malls with declining performance in recent years. Furthermore, Moody’s has identified three troubled loans (6% of the pool) that may have heightened refinance risk due to their poor performance and/or upcoming lease rollover risk. All the remaining loans mature by August 2023 and if certain loans are unable to pay off at their maturity date, the outstanding classes may face increased risk of interest shortfalls.
The ratings on two P&I classes, Cl. F and Cl. G, were affirmed because the ratings are consistent with Moody’s expected.
The rating on the IO class, Cl. X-A, was affirmed based on the credit quality of its referenced classes.
We regard e-commerce competition as a social risk under our ESG framework. The rise in e-commerce and changing consumer behavior presents challenges to brick-and-mortar discretionary retailers.
Moody’s rating action reflects a base expected loss of 17.8% of the current pooled balance, compared to 17.1% at Moody’s last review. Moody’s base expected loss plus realized losses is now 10.3% of the original pooled balance, compared to 10.6% 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. Additionally, significant changes in the 5-year rolling average of 10-year US Treasury rates will impact the magnitude of the interest rate adjustment and may lead to future rating actions.
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 a significant 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 interest-only classes were “US and Canadian Conduit/Fusion Commercial Mortgage-Backed Securitizations Methodology” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/391056 and “Large Loan and Single Asset/Single Borrower Commercial Mortgage-Backed Securitizations Methodology” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/391055. The methodologies used in rating interest-only classes were “US and Canadian Conduit/Fusion Commercial Mortgage-Backed Securitizations Methodology” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/391056, “Large Loan and Single Asset/Single Borrower Commercial Mortgage-Backed Securitizations Methodology” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/391055 and “Moody’s Approach to Rating Structured Finance Interest-Only (IO) Securities” published in February 2019 and available at https://ratings.moodys.com/api/rmc-documents/59126. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.
DEAL PERFORMANCE
As of the October 17th, 2022 distribution date, the transaction’s aggregate certificate balance has decreased by 51% to $561 million from $1.15 billion at securitization. The certificates are collateralized by 27 mortgage loans ranging in size from less than 1% to 15% of the pool. Eleven loans, constituting 47% 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 7, compared to 11 at Moody’s last review.
As of the October remittance report, except for one of the specially serviced loans (11.4% of the pool), all loans were current on their debt service payments or less than 30 days delinquent.
Five loans, constituting 8% 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.
Three loans have been liquidated from the pool, resulting in an aggregate realized loss of $17.6 million (for an average loss severity of 57%). Three loans, constituting 27% of the pool, are currently in special servicing.
The largest specially serviced loan is the Meadows Mall Loan ($81.9 million — 14.6% of the pool), which represents a pari-passu portion of a $122.4 million mortgage loan. The loan is secured by an approximately 308,000 square feet (SF) portion of a 945,000 SF regional mall located five miles west of the Strip in Las Vegas, Nevada. At securitization, the mall was anchored by non-collateral anchors Dillard’s, JC Penney, Sears and Macy’s. Sears closed their stores at this location in February 2020 and the space was partially backfilled by Round1 Bowling and Amusement. The property’s performance had deteriorated before the coronavirus outbreak and its reported net operating income (NOI) in 2019 was approximately 20% below the NOI in 2013 and 14% below the NOI in 2016. The property’s NOI further declined in 2021 and was approximately 12% lower than in 2019. The loan transferred to special servicing in October 2020 and a cash trap was implemented with rents being swept to the lockbox. Despite the declines in NOI, the DSCR has remained above 1.00X so the cash trap has been sufficient to keep the loan current. As of June 2022, the total mall was 95% leased and the inline space was 87% leased (including temporary tenants), compared to 97% and 91%, respectively, in March 2020. For the trailing twelve-month (TTM) period ending June 2022, in-line sales for tenants less than 10,000 SF was $443 per square foot (PSF) compared to $498 PSF for 2021. An updated appraised value in February 2021 was 60% lower than the securitization value and 29% below the outstanding loan amount. The loan has amortized 25.4% since securitization and remained current on its debt service payment as of the October remittance report. The loan has a current maturity date of July 2023 and given the recent performance would face heightened refinance risk. Servicer commentary indicates they are reviewing the borrower’s proposed modification terms.
The second largest specially serviced loan is the Southridge Mall Loan ($64.1 million — 11.4% of the pool), which represents a pari-passu portion of a $106.8 million mortgage loan. The loan is secured by a 554,000 SF portion of a 1.2 million SF regional mall in Greendale, Wisconsin, a suburb of Milwaukee. At securitization, the mall was anchored by non-collateral anchors Boston Store, Sears, J.C. Penney, and collateral anchors, Macy’s and Kohl’s. Sears and Boston Store vacated the property in 2017 and 2018, respectively. Subsequently Kohl’s moved their store to a new retail development in late 2018. The former Sears space was partially backfilled by a Dick’s Sporting Goods/Golf Galaxy, Round1 Bowling and Amusement, and T.J. Maxx, all of which opened for business between 2018 and 2019. The loan was transferred to special servicing in July 2020 for imminent monetary payment default. The mall’s 2021 NOI and annualized NOI as of August 2022 saw a decline of 40% from its 2019 NOI as a result of decreased revenues. The 2021 NOI DSCR was 0.89X, compared to 1.53X in 2020 and 1.50X in 2019. As of June 2022, the total mall was 89% leased and the inline space was 87% leased (including 23% leased by temporary tenants). The loan has amortized 14.6% since securitization and is last paid through its July 2022 debt service payment. A receiver was appointed in December 2020. An updated appraised value in August 2021 was 61% lower than the securitization value and 53% below the outstanding loan amount. As a result, an appraisal reduction of $30.6 million has been recognized on this loan as of the October 2022 remittance statement.
The remaining specially serviced loan is the Four Points Sheraton – San Diego Loan ($7.9 million 1.4% of the pool), which is secured by a 225-room full service hotel built in 1987 and located in Kearny Mesa, approximately 10 miles north of the San Diego central business district (CBD). The loan has been in special servicing since February 2016 due to imminent default and the borrower filed for Chapter 11 bankruptcy in May 2016. The loan is currently in cash trap and lockbox funds are utilized to fund monthly payments, ground lease, taxes, and operating expenses. The loan has amortized 16.5% since securitization and remained current on its debt service payment as of the October remittance report. The property’s performance has rebounded since 2020 and the loan had a 2.14X NOI DSCR for the TTM period ending June 2022.
Moody’s has also assumed a high default probability for three poorly performing loans, constituting 5.9% of the pool. The largest troubled loan is the 10 South Broadway Loan ($16.9 million 3.0% of the pool), which is secured by a 423,700 SF downtown office located in St. Louis, Missouri. The property’s occupancy had deteriorated since 2017. As of June 2022, the property was 69% leased, compared to 74% leased in December 2020 and 83% leased as of December 2018. The property also faces near-term rollover risk as tenants that occupy a combined 6% of the NRA have scheduled lease expirations in 2023. The St. Louis CBD office market vacancies have also increased since securitization. According to CBRE, the St. Louis CBD submarket included 12.1 million SF of office space in Q3 2022 with a vacancy of 26.3%, compared to a vacancy rate of 14.1% in year-end 2016. Due to the property’s decline in occupancy, its near-term rollover risk, and the vacancy in St. Louis CBD office market, the loan faces heightened refinance risk at the loan’s August 2023 maturity date.
The other two troubled loans making up a combined 2.9% of the pool, are secured by two limited-service hotels located in Fort Worth, Texas and North Charleston, South Carolina, both of which have been negatively impacted by coronavirus-related disruptions and have not yet fully recovered. Moody’s has estimated an aggregate loss of $95.9 million (a 51% expected loss) from the specially serviced loan and troubled loans.
As of the October 2022 remittance statement cumulative interest shortfalls were $1.8 million. Moody’s anticipates interest shortfalls will continue because of the exposure to specially serviced loans and troubled loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal entitlement reductions (ASERs), loan modifications and extraordinary trust expenses.
The credit risk of loans is determined primarily by two factors: 1) Moody’s assessment of the probability of default, which is largely driven by each loan’s DSCR, and 2) Moody’s assessment of the severity of loss upon a default, which is largely driven by each loan’s loan-to-value ratio, referred to as the Moody’s LTV or MLTV. As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan’s amortization profile. The MLTV reported in this publication reflects the MLTV before the adjustments described in the methodology.
Moody’s received full or partial year 2021 and partial 2022 operating results for 100% of the pool (excluding specially serviced and defeased loans). Moody’s weighted average conduit LTV is 89%, compared to 102% 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 14% to the most recently available net operating income (NOI. Moody’s value reflects a weighted average capitalization rate of 10.8%.
Moody’s actual and stressed conduit DSCRs are 1.89X and 1.55X, respectively, compared to 1.36X and 1.09X 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 12% of the pool balance. The largest loan is the Republic Services Corporate Headquarters Loan ($25.0 million 4.5% of the pool), which is secured by a first mortgage lien on an office building located in Phoenix, Arizona. As of June 2022 rent roll, the property was fully occupied by a single tenant with a lease expiration in April 2032. Due to the single tenant concentration, Moody’s applied a “Lit/Dark” analysis. The loan benefits from amortization and has amortized nearly 11% from securitization. The loan matures in June 2023 and Moody’s LTV and stressed DSCR are 82% and 1.33X, respectively.
The second largest loan is the Copper Creek Portfolio Loan ($24.5 million 4.4% of the pool), which is secured by two warehouse properties located in Illinois and fully leased to Federal Signal Corporation. Both properties reportedly sold between December 2021 and February 2022 at prices significantly above the loan balance. The loan matures July 2023 and as a result of the recent transactions the loan is expected to payoff in full at or near its maturity date.
The third largest loan is the Pittsburgh Hyatt Place Loan ($20.1 million 3.6% of the pool), which is secured by a 178-key Hyatt Place located in Pittsburgh, PA. The hotel is located adjacent to PNC Park and Heinz Field. While there was a drop in the property’s NOI in 2020 due to the shutdown related to the coronavirus pandemic, the property’s NOI has bounced back significantly in 2021 and 2022. The loan also benefits from amortization and has amortized nearly 17% from securitization. The loan matures in July 2023 and Moody’s LTV and stressed DSCR are 133% and 0.98X, respectively.
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 on https://ratings.moodys.com/rating-definitions.
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 issuer/deal page for the respective issuer on https://ratings.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 https://ratings.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://ratings.moodys.com/documents/PBC_1288235.
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 https://ratings.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.
Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Kevin Li
Asst Vice President – 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
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U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
