Fitch Affirms MSBAM 2013-C11 Ratings; Revises Outlooks to Negative
KEY RATING DRIVERS
The affirmations are based on the generally stable performance of the pool. The Negative Outlooks on classes D through G reflect the deterioration in performance of the third largest loan in the pool, Matrix Corporate Center.
As of the April 2016 distribution date, the pool's aggregate principal balance has been reduced by 2.8% to \\$832 million from \\$856.3 million at issuance. The pool has one specially serviced loan (9.8%) at present and one loan (0.4%) on the servicer watch list.
There were three variances from criteria related to classes B, C, and G, based on the surveillance criteria. The surveillance criteria indicated that rating upgrades were possible for classes B and C. However, Fitch has determined that rating upgrades are not warranted at this time as there has been no material improvement to the performance of the pool since issuance and no significant increase in credit enhancement. Additionally, surveillance criteria indicated that a downgrade was possible on class G. However, Fitch determined that downgrades are not warranted at this time in the cycle of the deal as seasoning is somewhat limited, and due to the uncertainty surrounding the workout of the Matrix Corporate Center loan.
The largest contributor to expected losses is Matrix Corporate Center (9.8% of the pool) which is secured by a 1 million square foot (sf) office property located in Danbury, CT. This loan transferred to special servicing February 2016 as a result of declining occupancy and the death of the loan's guarantor. At issuance the property was 72.3% occupied. Since issuance, one of its largest tenant's, Boehringer Ingelheim, exercised its right to reduce its footprint in the space by 11.9% of net rentable area (NRA). Occupancy as of year-end 2015 was 55.7% but would decline to 36.8% by December 2016, when Praxair Corporation (19% of NRA) vacates its space. Praxair Corporation has purchased a new headquarters nearby and will not be renewing its lease. This loan has been noted as a Fitch Loan of Concern and will continue to be monitored.
The largest loan, Westfield Countryside (12% of pool), is secured by 464,836 sf of a 1.26 million sf regional mall located in Clearwater, FL. The mall is anchored by Sears, Macy's, Dillard's, and JCPenney, all of which are not part of the collateral. The largest collateral tenants are Cobb Theatres, XXI Forever, LA Fitness, and Victoria's Secret. As of the year-end 2015 rent roll, collateral occupancy was 95% up from 90% as of 1Q2015. Total mall occupancy was 98% as of year-end 2015. NOI was roughly flat between 2014 and 2015. Gap (2.6% of NRA) vacated its space upon its January 2016 lease expiration.
The next largest loan, The Mall at Tuttle Crossing (11.3 %), is secured by 385,057 sf of a 1.14 million sf regional mall located in Dublin, OH. The mall is anchored by two Macy's stores, JCPenney, and Sears, all of which are not part of the collateral. The largest collateral tenants are The Finish Line, Shoe Dept. Encore, Victoria's Secret, and H&M. Collateral occupancy was 88%, unchanged year over year. The overall mall occupancy was 95% as of year-end 2015. NOI was roughly flat between 2014 and 2015.
Additionally, Fitch has noted Hampton Inn - Katy, TX (0.4%) as a Loan of Concern. The loan is secured by a 69-key hotel located in Katy, TX. Third quarter 2015 DSCR was 1.15x, down from 2.50x as of year-end 2014; however, it should be noted that the loan is amortizing on a 15-year schedule. At issuance it was noted that the property was exposed to corporate accounts related to the oil industry. Per its December 2015 Smith Travel Research (STR) report, the property reflected Revenue per available room (RevPAR) of \\$93.62 compared with RevPAR of \\$70.64 generated by its competitive set. Fitch will continue to monitor this loan.
RATING SENSITIVITIES
Fitch has revised the Ratings Outlook on classes D through G to Negative as a result of the negative impact from stressed analysis on Matrix Corporate Center. Sustained underperformance may warrant downgrades; conversely, Ratings Outlooks may be revised to Stable should asset level performance revert to levels seen at issuance. Ratings Outlooks on A-1 through C remain Stable due to the relatively stable performance of the pool. Downgrades are possible with continued significant performance decline. Upgrades to senior classes, while not likely in the near term, are possible with increased credit enhancement and overall improved pool performance.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch affirms the ratings and revises the Outlook on the following classes:
--\\$38.5 million class D at 'BBB-sf'; Outlook to Negative from Stable.
--\\$9.6 million class E at 'BBB-sf'; Outlook to Negative from Stable;
--\\$8.6 million class F at 'BB+sf'; Outlook to Negative from Stable;
--\\$20.3 million class G at 'Bsf'; Outlook to Negative from Stable.
Fitch has affirmed the following classes:
--\\$28.6 million class A-1 at 'AAAsf'; Outlook Stable;
--\\$142 million class A-2 at 'AAAsf'; Outlook Stable;
--\\$73 million class A-AB at 'AAAsf'; Outlook Stable;
--\\$125 million class A-3 at 'AAAsf'; Outlook Stable;
--\\$206.5 million class A-4 at 'AAAsf'; Outlook Stable;
--Interest-only class X-A at 'AAAsf'; Outlook Stable;
--\\$49.2 million class A-S at 'AAAsf'; Outlook Stable;
--\\$61 million class B at 'AA-sf'; Outlook Stable;
--\\$34.3 million class C at 'A-sf'; Outlook Stable;
--\\$144.5 million class PST at 'A-sf'; Outlook Stable;
Fitch does not rate the class H, J, or X-B certificates. The class A-S, B, and C certificates may be exchanged for class PST certificates, and the class PST certificate may be exchanged for the class A-S, B, and C certificates.
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