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MACY'S, INC.

(M)
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Delayed Nyse  -  04:00 2022-11-29 pm EST
23.49 USD   +1.51%
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Fitch Affirms MSBAM 2013-C10; Four Outlooks Revised to Stable

09/27/2022 | 06:15am EST

Fitch Ratings has affirmed 16 classes of Morgan Stanley Bank of America Merrill Lynch Trust, commercial mortgage pass-through certificates, series 2013-C10 (MSBAM 2013-C10).

In addition, the Rating Outlooks for four classes have been revised to Stable from Negative.

RATING ACTIONS

Entity / Debt

Rating

Prior

MSBAM 2013-C10

A-3 61762MBV2

LT

AAAsf

Affirmed

AAAsf

A-3FL 61762MAW1

LT

AAAsf

Affirmed

AAAsf

A-3FX 61762MAY7

LT

AAAsf

Affirmed

AAAsf

A-4 61762MBW0

LT

AAAsf

Affirmed

AAAsf

A-5 61762MCC3

LT

AAAsf

Affirmed

AAAsf

A-S 61762MBY6

LT

AAAsf

Affirmed

AAAsf

A-SB 61762MBU4

LT

AAAsf

Affirmed

AAAsf

B 61762MBZ3

LT

Asf

Affirmed

Asf

C 61762MCB5

LT

BBBsf

Affirmed

BBBsf

Page

of 2

VIEW ADDITIONAL RATING DETAILS

Classes X-A is interest only (IO).

The exchangeable class PST can be exchanged for classes A-S, B and C.

KEY RATING DRIVERS

Generally Stable Loss Expectations/Expected Paydown: The affirmations reflect continued stable performance of the majority of the loans in the pool. Loss expectations are generally in line with the prior rating action. There are thirteen (30.4%) Fitch Loans of Concern (FLOCs), including three loans (13.7%) in special servicing. Fitch's current ratings incorporate a base case loss of 9.8%.

The Outlook revision for classes A-S, B, C and PST to Stable from Negative reflect the stable loss expectations and paydown. The Negative Outlook for class D reflects the potential for downgrades should any of the loans in the pool fail to repay at their respective maturities and experience prolonged workout periods and/or losses.

The largest contributor to expected loss is the largest loan in the pool, Westfield Citrus Park (10.7% of the pool), which was modified and assumed prior to being transferred back to the master servicer in June 2022. The loan had previously transferred to special servicing in July 2020 due to imminent default after missing its May 2020 debt service payment. The former sponsor, Westfield America, relinquished control of the property and the loan has been assumed by Hull Property Group. The modified loan terms include an extension of the maturity date to June 2028 and IO payments.

The loan is secured by a 494,189-sf portion of a 1.0 million-sf regional mall located in Tampa, FL. The mall is anchored by non-collateral Dillard's, Macy's and JCPenney. A dark non-collateral former Sears is being redeveloped as a multipurpose entertainment center. The largest collateral tenants include Regal Cinemas (whose parent company Cineworld recently filed Chapter 11 bankruptcy) and Dick's Sporting Goods.

The TTM June 2021 comparable in-line sales were approximately $120 psf compared to $379 psf at YE 2019, and $378 psf at issuance (TTM April 2013). The 20-screen Regal Cinemas, which reopened in May 2021 after closing in October 2020 due to COVID, had reported sales of $292,100/screen in 2019, compared to $365,400/screen in 2017 and $407,050/screen in 2016. The reported occupancy was 91% as of YE 2021 with a NOI DSCR of 1.04x.

Fitch expected loss of approximately 50% factors a discount to a recent valuations and weak financial performance.

The second largest contributor to expected loss is the specially serviced The Mall at Tuttle Crossing loan (2.3%), which is secured by a regional mall located in Dublin, OH. The loan transferred to special servicing in July 2020 due to imminent monetary default. In August 2020, the sponsor, Simon Property Group, disclosed that they plan to return the collateral to the lender. The receiver, who was appointed in January 2021, has been working on stabilizing the property and preparing it for a potential receivership sale.

The mall's non-collateral anchors include Macy's, JCPenney and Scene 75. Sears, a non-collateral anchor, closed in March 2019 at the property. Macy's previously had a second location at this mall which went dark and was re-leased to Scene 75 which opened in October 2019. As of March 2022, occupancy has improved to 81% from 76% at YE 2021, and 69% as of 2Q20, but remains below occupancy of 91% as of YE 2019. The reported NOI remains well below issuance with March 2022 NOI DSCR declining to 0.73x, from 0.81x at YE 2021, and 1.55x at YE 2020 and 3.13x at issuance. Recent sales were unavailable, but comparable in-line tenant sales were $299 psf in 2019, compared to $324 in 2018, $337 psf in 2017 and $365 psf in 2016.

Fitch expected loss of approximately 82% factors a discount to a recent appraisal value and reflects low historical sales, refinance risk and lack of sponsor commitment.

The third largest contributor to expected loss is the specially serviced Oak Brook Center (1.7% ), which transferred to special servicing in April 2022 for payment default. The suburban Chicago office property has experienced the departure of large tenants at their respective lease expirations. The reported March 2022 occupancy was 32%. Fitch's loss expectations of 36% reflects a value of $40 per square foot and is driven by significant occupancy and value decline along with weak submarket fundamentals.

Defeasance and Improved Credit Enhancement: As of the September 2022 distribution date, the pool's aggregate principal balance has paid down by 23.6% to $1.134 billion from $1.486 billion at issuance. Sixteen loans (30.3%) have been defeased. Six loans paid in full (4.4% of original deal balance) since Fitch's prior rating action. One loan (2.3% of original deal balance) was disposed with a 29% loss severity and impacted the non-rated class J. Excluding specially serviced loans, 61.6% of the remaining pool is amortizing and 72.3% is scheduled to mature in 2023. The largest loan, Westfield Citrus Park (10.7%), was modified and pays IO with its maturity date extended to June 2028.

Alternative Loss Scenario: Due to the large concentration of loan maturities in 2023, Fitch performed a sensitivity and liquidation analysis, which grouped the remaining loans based on their current status and collateral quality and ranked them by their perceived likelihood of repayment and/or loss expectation. This analysis contributed to the affirmations, outlook revisions for classes A-S, B, C and PST and the continued Negative Outlook for class D.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The 'AAAsf' classes are unlikely to be downgraded given the credit enhancement (CE) and significant defeasance, but could be downgraded should they suffer interest shortfalls. Classes B, C and D could be subject to downgrade should overall loss expectations increase, in particular the loans secured by regional mall loans and loans in special servicing. The distressed classes E and below are subject to further downgrade should additional loans transfer to special servicing, losses are realized or become more certain on specially serviced loans.

Fitch has identified both a baseline and a worse-than-expected, adverse stagflation scenario based on fallout from the Russia-Ukraine war whereby growth is sharply lower amid higher inflation and interest rates; even if the adverse scenario should play out, Fitch expects virtually no impact on ratings performance, indicating very few rating or Outlook changes. However, for some transactions with concentrations in underperforming retail exposure, the ratings impact may be mild to modest, indicating some changes on sub-investment grade notes.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Upgrades to classes B through C would only occur with significant improvement in CE and/or defeasance and additional loan payoffs. Classes would not be upgraded above 'Asf' if there is a likelihood of interest shortfalls. Upgrades to classes D and below are considered unlikely unless the specially serviced loans and modified loans liquidate with recoveries well above expectations.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Additional information is available on www.fitchratings.com

(C) 2022 Electronic News Publishing, source ENP Newswire

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MACY'S, INC. 1.51% 23.49 Delayed Quote.-11.61%
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Financials (USD)
Sales 2023 24 502 M - -
Net income 2023 1 135 M - -
Net Debt 2023 1 740 M - -
P/E ratio 2023 5,79x
Yield 2023 2,69%
Capitalization 6 366 M 6 366 M -
EV / Sales 2023 0,33x
EV / Sales 2024 0,32x
Nbr of Employees 88 857
Free-Float 86,5%
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Mean consensus HOLD
Number of Analysts 17
Last Close Price 23,49 $
Average target price 23,28 $
Spread / Average Target -0,90%
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Managers and Directors
Jeffrey Gennette President & Director
Adrian V. Mitchell Chief Financial Officer & Executive Vice President
Laura M. Miller Chief Information Officer
Sara L. Levinson Independent Director
Deirdre P. Connelly Independent Director
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