CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed 14 classes of Morgan Stanley Capital I, commercial mortgage pass-through certificates, series 2013-C8. A detailed list of rating actions follows at the end of this report.
KEY RATING DRIVERS
The affirmations follow the pool's continued stable performance since issuance. This transaction closed in 2013, and since issuance, it has experienced approximately 3.3% collateral reduction. There have been no delinquent or specially serviced loans to date, but there are eight loans on the watchlist, including three Top 15 loans.
The largest loan in the pool is The Crossings Premium Outlets (10.4% of the pool), which is secured by a 411,223 square foot (sf) retail outlet center in Tannersville, Pennsylvania owned by Simon Property Group. Major tenants include Forever 21, Gap and Nike. This loan was structured with a three-year IO period, which is scheduled to burn off in Q2 2016. The property was 96.9% occupied as of June 2015, although two large tenants, including Nike, have upcoming lease expirations. This loan is currently on the servicer's watchlist for deferred maintenance noted in the most recent site inspection. Fitch does not believe this issue is material to the property's performance.
The second largest loan is the Chrysler East Building. The collateral is a 745,201 sf office building located in Manhattan's Grand Central submarket, adjacent to the iconic Chrysler Building. The subject building is owned and operated by Tishman Speyer. Several tenants have vacated the property since issuance bringing occupancy down to 78.3% as of August 2015 from 96.3% in October 2012. Credit Agricole (previously 18.9% of the NRA) was subleasing all of its space at issuance. Despite talks at the time of signing direct leases with the sublet tenants, the majority of the space was given back at lease expiration in May 2015. Grant Thornton was the third largest tenant at issuance (8.4% of the NRA), and its lease expired in November 2014. Based on the most recent rent roll, this tenant does not appear to have renewed. There is speculation that a large firm is in talks with management regarding a new lease at the property; however, there has been no confirmation that any new leases have been signed since August 2015. The property is well located and benefits from an experienced sponsor, which has approximately $49.6 million of equity in the building. This loan is interest only for the full term.
Boston Park Plaza, a 941-key full service hotel in Boston's Back Bay neighborhood, secures the third largest loan in the pool. The boutique hotel is located within blocks of Copley Plaza and Boston Common and competes with several nationally branded, full-service hotels in close proximity, including the Sheraton Copley Plaza, the Marriott Copley Plaza, the Hilton Boston Back Bay and the Westin Copley Plaza. Although the sponsors completed an $11.6 million renovation shortly after acquiring the property in 2012, additional phases of construction and renovation have been ongoing since the loan's securitization. According to the borrower, $27.5 million in material alterations have been completed to date in 2015, with another $38.6 million planned for 2016. The renovations include upgrades to guest rooms, hallways, lobby, restrooms, meeting spaces and exterior finishes. A new ballroom and fitness center are also being added. A completion guaranty has been provided for the portion that exceeds the initial mezzanine funding commitment. Based on the August 2015 STR report, the property is underperforming in terms of ADR and RevPAR relative to its competitive set; however, given the property's boutique nature as an un-flagged hotel, this is expected. The YE2014 DSCR was reported to be 2.44x. Occupancy for the trailing 12 months as of August 2015 was 80.1%.
11451 Katy Freeway (2% of the pool) is considered a Fitch Loan of Concern given occupancy concerns and its location in a soft market. This loan is also on the servicer's watchlist. The Houston, Texas office property lost its second largest tenant at the end of 2014, bringing occupancy down to 69.9% from 100% at YE2013. Black Elk Energy (previously 35.5% of the NRA) filed for bankruptcy and vacated the property ahead of its December 2020 lease expiration. The tenant remitted a $250,000 payment, $216,905 of which is still being held, for releasing the space, but a termination fee has reportedly not yet been collected. This loan was structured with an initial IO period, which burned off in April 2015. The annualized Q2 2015 NOI DSCR was reported to be 1.60x. In comparison, at issuance, the Fitch stressed NCF DSCR was 1.07x. Fitch will continue to monitor this loan.
RATING SENSITIVITIES
The Rating Outlook remains Stable for all classes. Due to the recent issuance of the transaction and overall stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's portfolio-level metrics.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch affirms the following classes:
--$38.5 million class A-1 at 'AAAsf', Outlook Stable;
--$145.9 million class A-2 at 'AAAsf', Outlook Stable;
--$99 million class ASB at 'AAAsf', Outlook Stable;
--$140 million class A-3 at 'AAAsf', Outlook Stable;
--$336 million class A-4 at 'AAAsf', Outlook Stable;
--$108.1 million** class A-S at 'AAAsf', Outlook Stable;
--$68.3 million** class B at 'AA-sf', Outlook Stable;
--$42.7 million** class C at 'A-sf', Outlook Stable;
--$219.1** class PST at 'A-sf', Outlook Stable;
--$48.4 million class D at 'BBB-sf', Outlook Stable;
--$19.9 million class E at 'BBsf', Outlook Stable;
--$12.8 million class F at 'Bsf', Outlook Stable;
--$867.4 million* class X-A at 'AAAsf', Outlook Stable;
--$68.3 million* class X-B at 'AA-sf', Outlook Stable.
*Notional amount and interest-only.
**Class A-S, B and C certificates may be exchanged for a related amount of class PST certificates, and vice versa. The noted balance of class PST is the maximum balance based on the allowed exchanges. No exchange between the class A-S, B, C and PST certificates have been made to date.
Fitch does not rate the class G and H certificates.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S.
Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996505
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996505
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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