Fitch Announces Downgrades on Three Commercial Mortgage Transfer Agreements
Fitch Ratings has announced downgrades affecting eight categories of Commercial Mortgage Transfer Certificates. Rating actions are driven by the performance of loans to two regional shopping center loans, an office building in Chicago, a retail property in Manhattan’s Chelsea neighborhood and a retail property in Port Chester, NY
Six classes of transfer certificates in the GS Mortgage Securities Trust, 2013-GC13 have been downgraded, reflecting increased loss expectations on the pool related to specialty lending in two regional trading centers.
Fitch said the pool had a substantial concentration of loans of concern, about 34.5%, in the pool, as well as four specially managed loans, representing 27.6% of the pool.
Two retail home loans, both sponsored by Brookfield Properties, are the top contributors to Fitch’s base-case collateral pool losses. The loan on the 670,376 square foot portion of a 1 million square foot shopping center in St. Matthews, representing 11.7% of the pool, is the biggest contributor to loss expectations, Fitch said.
While the property was 92% rented from September 2021 rental listings, it was transferred to special service in June 2020, after failing to repay past its due date. Brookfield Properties sponsored the transaction, according to Fitch.
The second largest contributor to expected losses is the specially served Crossroads Center, which accounts for 7.9% of the collateral pool. The borrower is unwilling to inject additional funds into the loan, but is willing to manage the property, according to Fitch.
Fitch also downgraded a class on the COMM 2013-CCRE13 Mortgage Trust. A 22-story, 1.45 million square foot office building at 175 West Jackson Boulevard in downtown Chicago, representing 10.4% of the pool, is the top contributor to overall losses.
An occupancy rate that has languished below 70% since 2018 continues to challenge the property. The office building had an occupancy rate of 65% in September 2021, up slightly from 63% at the end of 2020, 67% at the end of 2019 and 61% at the end of 2018.
The second largest contributor to the losses is a loan on a 16,225 square foot commercial building at 525 West 22nd Street in Manhattan’s Chelsea neighborhood. It had recently lost a tenant, Danese Gallery, which caused its occupancy rate to drop to 41.5%. Existing tenant Ameringer Yohe has expanded into the vacant space, recovering its occupancy somewhat, to 68% in June 2021, Fitch said.
Fitch also announced that it had downgraded Morgan Stanley Bank of America Merrill Lynch Trust (MSBAM) Class F to 2015-C22, noting higher losses on the specially managed loan Hilton Houston Westchase, which defaulted in March 2020.
The Westchase loan represents 4.3% of the collateral pool and is secured by a 297-key full-service hotel located in Houston’s Energy Corridor. The Westchase loan defaulted after being plagued by falling oil and gas prices and oversupply in the Houston real estate market. The economic impact of the coronavirus pandemic has exacerbated matters, Fitch said. The borrower had obtained forbearance from April to July 2020, but was unable to reach terms on a long-term modification thereafter.
The downgrades weren’t the only actions on the deals. Fitch affirmed the ratings of seven classes of notes under the GS Mortgage Securities Trust agreement; 10 courses on COMM 2013-CCRE13; and 12 classes on the MSBAM transaction.