Fitch Affirms WFRBS 2013-C12

CHICAGO--()--Fitch Ratings has affirmed 15 classes of WFRBS Commercial Mortgage Trust (WFRBS) commercial mortgage pass-through certificates series 2013-C12. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The affirmations reflect the transaction's overall stable performance since issuance. Seventeen loans (11.8%) are on the servicer's watchlist, of which eight (8.3%) are for declines in occupancy, four (2.0%) for lease rollover concerns and two (1.2%) for lack of borrower reporting. Fitch has designated five loans (4.3%) as Fitch Loans of Concern, which includes one specially serviced asset (2.4%). There is also a notable single-tenant exposure within the transaction. Four of the top 15 loans representing 16.1% of the pool are secured by properties 100% leased to a single tenant.

Fitch modeled losses of 3.5% of the remaining pool, which is within 100 basis points of the base case losses at issuance. The pool has experienced no realized losses to date. As of the June 2016 distribution date, the pool's aggregate principal balance has been reduced by 4.9% to $1.17 billion from $1.23 billion at issuance. Per the servicer reporting, four loans (13% of the pool) are defeased. Interest shortfalls are currently affecting class G.

The specially-serviced loan (2.4% of the pool) is secured by a 665-unit (1,074-bed) student housing complex in Newark, DE, roughly 40 miles southwest of Philadelphia. The property is located one mile from the University of Delaware campus. The loan transferred in April 2016 due to an imminent default letter received from the borrower, which stated that the property's net cash flow is not sufficient to cover debt service. After acquiring the subject in 2008, the borrower repositioned the property from traditional multifamily to student housing and constructed a $6 million student center with a basketball court, swimming pool, business center and theater room. The special servicer reports that a pre-negotiation letter has been executed and dialogue with the borrower has commenced. As of June 2015, occupancy was reported to be 71% while the debt service coverage ratio (DSCR) was reported to be 1.64x.

The largest loan in the pool is the Grand Beach Hotel loan (10.5% of the pool), which is secured by a 424-room, 20-story, full-service oceanfront hotel located in Miami Beach, Florida. Amenities at the property include a fitness center, three pools, full-service restaurant, meeting facilities, a business center, and valet parking including 560 spaces. As of year-end (YE) 2015, the DSCR was reported to be 2.14x compared to 2.13x at issuance. According to the May 2016 STR report, the trailing 12-month (TTM) occupancy was reported to be 67%, which ranks second to last in the property's competitive set. Occupancy has been trending downward since 2013 when the TTM occupancy was reported to be 83%. ADR and RevPar, however, have remained in the middle of the competitive set for the last two years.

The second largest loan in the pool is the RHP Portfolio II loan (9.7% of the pool). The loan is collateralized by 18 manufactured housing communities comprising 2,967 home pads with nine properties in Colorado (1,814 pads), six in Wyoming (737 pads), two in Illinois (351 pads), and one in Arizona (65 pads). As of YE 2015, the occupancy and DSCR was reported to be 94% and 1.83x respectively, which compares favorably to 86% and 1.47x at issuance.

RATING SENSITIVITIES

The Rating Outlook for class B has been revised to Positive to reflect the defeased collateral and increased credit enhancement. An upgrade may be warranted if additional loans are defeased, the transaction continues to pay down and further clarity on the resolution of the specially serviced loan can be obtained. The Outlooks for classes A-1 through A3-FL remain Stable due to overall stable collateral performance. Fitch does not foresee positive or negative ratings migration for these classes unless a material economic or asset level event changes the underlying 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 class and revises the Outlook as indicated:

--$75.4 million class B at 'AA-sf'; Outlook to Positive from Stable.

Fitch affirms the following classes:

--$4.1 million class A-1 at 'AAAsf'; Outlook Stable;

--$143 million class A-2 at 'AAAsf'; Outlook Stable;

--$165 million class A-3 at 'AAAsf'; Outlook Stable;

--$298.2 million class A-4 at 'AAAsf'; Outlook Stable;

--$102 million class A-SB at 'AAAsf'; Outlook Stable;

--$90 million class A-3FL at 'AAAsf'; Outlook Stable;

--$90 million class A-3FX at 'AAAsf'; Outlook Stable;

--$120.1 million class A-S at 'AAAsf'; Outlook Stable;

--$922.3 million class X-A at 'AAAsf'; Outlook Stable;

--$126.2 million class X-B at 'A-sf'; Outlook Stable;

--$50.8 million class C at 'A-sf'; Outlook Stable;

--$41.6 million class D at 'BBB-sf'; Outlook Stable;

--$27.7 million class E at 'BBsf'; Outlook Stable;

--$16.9 million class F at 'Bsf'; Outlook Stable.

Fitch does not rate the class X-C or G certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

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

Related Research

WFRBS Commercial Mortgage Trust 2013-C12 Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=706097

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008919

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008919

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Daniel Anderson
Associate Director
+1-312-606-2305
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga
+1-212-908-0278
New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Daniel Anderson
Associate Director
+1-312-606-2305
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga
+1-212-908-0278
New York
sandro.scenga@fitchratings.com