Fitch Downgrades Two Classes of COMM 2013-CCRE12

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded two and affirmed 12 classes of COMM 2013-CCRE12 commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrades and removal from Rating Watch Negative of classes E and F are the result of increased loss expectations based on significantly lower value estimates provided by the special servicer, as well as greater clarity on the workout strategies for the three North Dakota loans in special servicing. The loans are all located in the Bakken shale region of North Dakota, a market that continues to be severely affected by low oil prices. Recent draft appraisals, two of which were received subsequent to the Rating Watch actions, indicate property values have declined considerably from issuance. Fitch identified seven loans (6.7%) as loans of concern, including four loans in special servicing totaling $36.4 million (3.1%).

As of the July 2016 distribution date, the pool's aggregate principal balance has been reduced by 2.20% to $1.17 billion from $1.20 billion at issuance. Interest shortfalls are currently affecting class G.

The largest specially serviced loan, Roosevelt East Apartments (1.3% of the pool) is secured by a 131-unit garden style multifamily complex in Williston, ND. The loan was transferred to the special servicer in October 2015 for imminent default, and subsequently defaulted on the November 2015 payment. As of March 2016, occupancy declined to 60% from 96% year-end 2014. Although a more recent occupancy figure was not available, based on market conditions and demand, it is likely that occupancy has further fallen since the last reporting period. The servicer, which has previously provided a draft appraisal, expects to finalize an appraisal shortly.

The other two specially serviced loans in North Dakota are Pheasant Ridge (0.4%) and Dakota Apartments (0.3%). Both loans were transferred to the special servicer in February 2016 due to imminent monetary default. Pheasant Ridge is collateralized by a 42-unit multifamily property located in Watford City, ND. Occupancy declined to 24% as of March 2016 compared with 95% at year-end 2014. Dakota Apartments is collateralized by a 32-unit multifamily property located in Stanley, ND. Occupancy declined to 25% as of March 2016 compared with 100% at year-end 2014. Appraisals have not yet been finalized due to the volatile nature of the market; however, draft appraisals were provided.

The most recently transferred and the second largest specially serviced loan, The Crossings (1.1%) is secured by a 216,330 square foot (sf) anchored retail center, built in 1989, and located in Elkview, WV. Kmart is the anchor tenant, occupying 86,479 sf (39.99% GLA), with a lease expiration of Nov. 30, 2019. The loan was transferred to the special servicer effective Aug. 2, 2016 due to imminent monetary default. The property was hit by severe storms which caused flooding and high waters in June 2016. The culvert bridge in front of the shopping center collapsed, removing the only entrance and exit point to the shopping center. Kanawha County, where the property is located, has been declared a federal disaster area. Local, state, and FEMA agencies are discussing ways to repair and/or replace the bridge and other affected areas. Per the servicer, the borrower has failed to provide the YE 2015 and Q1 2016 financials. As of September 2015, occupancy declined to 92% from 96% at YE 2014.

The MAve Hotel(1.8%), a 12-story, limited-service boutique hotel in the Flatiron District of Manhattan, New York is identified as a Fitch Loan of Concern due to declining DSCR. The property houses a total of 72 guestrooms, including full-sized, queen, king and double-bed rooms, and one penthouse suite. The servicer reported occupancy and DSCR decreased to 83% and 0.94x respectively as of YE 2015 from 90% and 1.51x at YE 2014. Per the servicer, the DSCR decrease is primarily attributed to a decrease in room revenue and an increase in expenses, especially in repairs and maintenance. Fitch will continue to monitor the property's performance.

RATING SENSITIVITIES

The Rating Outlooks on classes A-1 through C are expected to remain Stable based on expected continued paydown and sufficient credit enhancement. Upgrades are not expected until the transaction receives significant paydown or improved performance. To date, the majority of partial interest-only loan terms have expired and the pace of amortization should increase, which should improve credit enhancement if pool performance improves. Downgrades to classes D through F are possible should expected losses on the specially serviced loans increase.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has downgraded, assigned Rating Outlooks and removed from Rating Watch Negative, the ratings for the following classes as indicated:

--$23.9 million class E to 'Bsf' from 'BBsf'; Outlook Stable;

--$16.5 million class F to 'CCCsf' from 'Bsf'; RE 100%.

Fitch has affirmed the following classes:

--$35.4 million class A-1 at 'AAAsf'; Outlook Stable;

--$98.5 million class A-2 at 'AAAsf'; Outlook Stable;

--$96.5 million class A-SB at 'AAAsf'; Outlook Stable;

--$225 million class A-3 at 'AAAsf'; Outlook Stable;

--$356 million class A-4 at 'AAAsf'; Outlook Stable;

--$76.3 million class A-M at 'AAAsf'; Outlook Stable;

--$79.3 million class B at 'AA-sf'; Outlook Stable;

--$204.9 million class PEZ at 'A-sf'; Outlook Stable;

--$49.4 million class C at 'A-sf'; Outlook Stable;

--$64.3 million class D at 'BBB-sf'; Outlook Negative;

--$887.6 million* class X-A at 'AAAsf'; Outlook Stable;

--$193 million* class X-B at 'BBB-sf'; Outlook Negative.

*Notional amount and interest only.

Fitch does not rate the class G or class X-C certificates. The class A-M, B, and C certificates may be exchanged for the class PEZ certificates, and the class PEZ certificates may be exchanged for the class A-M, B, and C certificates. Fitch rates the class PEZ equivalent to the first loss of the lowest rated class C exchangeable certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

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

COMM 2013 -- CCRE12 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=727199

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009999

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009999

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160804006525/en/

Fitch Ratings
Primary Analyst
Catherine Barbieri
Associate Director
+1-212-908-0638
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
New York
[email protected]
or
Hannah James
+ 1-646-582-4947
New York
[email protected]

Source: Fitch Ratings

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