DBRS Morningstar Assigns Ratings to COMM 2013-300P Mortgage Trust

DBRS, Inc. (DBRS Morningstar) assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2013-300P issued by COMM 2013-300P Mortgage Trust (the Issuer) as follows:

-- Class A-1 at AAA (sf)
-- Class A-1P at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class X-A at AAA (sf)

All trends are Stable.

These certificates are currently also rated by DBRS Morningstar’s affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about May 4, 2020. In accordance with MCR’s engagement letter covering these certificates, upon withdrawal of MCR’s outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. Information about the MCR ratings, including the history of the MCR ratings, can be found at www.morningstarcreditratings.com.

On March 1, 2020, DBRS Morningstar finalized its “North American Single-Asset/Single-Borrower Ratings Methodology” (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. For further information on the NA SASB Methodology, please see the press release dated March 1, 2020, on the DBRS Morningstar website at www.dbrsmorningstar.com.

The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the “North American CMBS Surveillance Methodology,” as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis.

The collateral is a first-mortgage loan on 300 Park Avenue, which is secured by the fee simple interest in a Class A, 25-story LEED Silver-certified Midtown Manhattan office tower on the west side of Park Avenue between 49th and 50th Streets in New York. The property is 771,643 square feet (sf), 746,063 sf or 96.8% of which is office space. Other space includes 20,896 sf of retail and 4,297 sf of storage and other space. Constructed in 1954, the property’s layout consists of 24 office levels, a ground floor with retail, and a subterranean level with storage space.

The 10-year $485 million interest-only (IO) loan provided refinancing to pay off existing debt of $135.2 million, pay an upstream distribution of $334.3 million to the sponsors, fund $13.1 million in closing costs, and fund a tax reserve of $2.5 million. The sponsor on the loan is Prime Plus Investments, LLC, which is indirectly owned by Tishman Speyer Crown Equities 2007 LLC (Tishman Speyer); the National Pension Service acting for the National Pension Fund of the Republic of Korea; the Government of Singapore Investment Corporation (Realty) Pte Ltd.; and Andra AP-fonden, the Second Swedish National Pension Fund (AP2) of the Kingdom of Sweden. Tishman Speyer also serves as the property manager.

The property’s largest tenant is the Colgate-Palmolive Company (Colgate) and, as a result, the building is often referred to as the Colgate-Palmolive Building. At issuance, Colgate occupied 503,637 sf of the building, representing 65.3% of the net rentable area and approximately 77.9% of in-place annual rent. Colgate operates its corporate headquarters at the property and has been in tenancy since the building opened. The company extended its lease in 2008 with an initial lease expiry in June 2023, which included one 10-year extension option and an additional five-year extension option. In May 2019, Colgate exercised the 10-year renewal option and moved its lease expiry to 2033, but only retained 241,657 sf at a reduced rental rate of $93 per sf (psf) compared with $126 psf at issuance, which is closer to but still above the current average submarket rent according to Reis, Inc. Colgate will also return 97,343 sf of its original space in May 2020, but will continue to pay $140 psf for this space through the June 2023 expiry. Lastly, 164,637 sf of Colgate’s original space is subleased through June 2023, 109,631 sf of which is subleased to WeWork.

In the analysis for these rating actions, DBRS Morningstar used a net cash flow (NCF) of $42.1 million and a cap rate of 6.75% was applied, resulting in a DBRS Morningstar value of $624.2 million, a variance of -37.6% from the appraised value at issuance of $1.0 billion. The DBRS Morningstar Value implies an LTV of 77.7%, as compared with the LTV on the issuance appraised value of 48.5%.

The DBRS Morningstar NCF was re-analyzed for the subject rating action to confirm its consistency with the “DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria”. The NCF figure applied as part of the analysis represents a -30.6% variance from the issuer’s NCF primarily driven by Colgate’s downsizing and decrease in rental rates. As of YE2019, the servicer reported a NCF figure of $50.1 million, a 19.0% variance from the DBRS Morningstar NCF figure.

DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 3.5% to account for property quality and market fundamentals. DBRS Morningstar also made a negative 1.0% qualitative adjustment for cash flow volatility to account for additional tenant rollover.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Class XA is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are the North American Single-Asset/Single-Borrower Ratings Methodology and North American CMBS Surveillance Methodology, which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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