Fitch Ratings has downgraded two classes and affirmed 10 classes Morgan Stanley Bank of America Merrill Lynch Trust commercial mortgage pass-through certificates, series 2013-C11.
Four Outlooks have been revised to Stable from Negative.
RATING ACTIONS
Entity / Debt
Rating
Prior
MSBAM 2013-C11
A-3 61762TAD8
LT
AAAsf
Affirmed
AAAsf
A-4 61762TAE6
LT
Asf
Affirmed
Asf
A-AB 61762TAC0
LT
AAAsf
Affirmed
AAAsf
A-S 61762TAG1
LT
BBsf
Downgrade
BBB-sf
B 61762TAH9
LT
CCCsf
Downgrade
B-sf
C 61762TAK2
LT
CCsf
Affirmed
CCsf
D 61762TAN6
LT
CCsf
Affirmed
CCsf
E 61762TAQ9
LT
Csf
Affirmed
Csf
F 61762TAS5
LT
Csf
Affirmed
Csf
Page
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades reflect the increased loss expectations of Westfield Countryside and The Mall at Tuttle Crossing which remain in special servicing. The affirmations reflect the overall stable loss expectations of the performing loans and the better than expected outcome of the Southdale Mall loan which was defeased as of the August 2022 remittance. The Southdale Mall loan, was the largest loss contributor among the non-specially serviced loans at the prior review. Six loans (47.3% of the pool) have been designated as Fitch Loans of Concern (FLOCs) including two specially serviced loans (31.6%).
Fitch's current ratings reflect a base case loss of 24.9%. The Negative Outlook reflects the potential for downgrade given the specially serviced mall loans movement toward foreclosure and vulnerability to greater losses.
Largest Drivers to Loss: The Westfield Countryside loan (16.7%) is secured by a regional mall located in Clearwater, FL. The loan transferred to special servicing in June 2020 due to imminent monetary default. The sponsor, a joint venture between Westfield and O'Connor Capital Partners, indicated that they would no longer support the asset and is cooperating with a friendly foreclosure. A receiver was installed in January 2021. The special servicer is determining an appropriate time to market the property for sale.
The mall is anchored by Macy's, Dillard's, and JC Penney. Sears, a non-collateral anchor, closed in July 2018 after downsizing its space to accommodate a 37,000-sf Whole Foods, leaving a significant portion of the remaining Sears space as vacant. The mall's occupancy and NOI continues to decline from issuance. As of March 2022, occupancy was 71.4%, down from 82% at YE 2021, 88% at YE 2020 and 86.3% at issuance. Cash flow also trended down with NOI debt service coverage ratio (DSCR) of 1.11x at March 2022, down from 1.12x at YE 2021, 1.21x at YE 2020 and 2.45x at issuance. Inline sales were $375 psf at YE 2020 compared to $367 psf at YE 2019, $383 at YE 2018 and $396 at issuance.
Fitch's loss estimates of 70% factors a discount to a recent appraisal value and represents an implied 21% cap rate on YE 2021 NOI. The high loss severity reflects continued underperformance and direction toward foreclosure.
The Mall at Tuttle Crossing loan (15.0%) 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. 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 72% factors a discount to a recent appraisal value and reflects low historical sales, refinance risk and lack of sponsor commitment.
Bridgewater Campus (6.9%), a 446,649sf mixed-use eight building campus located in Bridgewater, NJ. As of March 2022, occupancy remains at 87% with NOI DSCR of 1.14x, down from 1.56x at YE 2021 and 1.85x at YE 2020. The property's occupancy declined to 87% as of YE 2020 from 100% in 2019 due to Insmed Inc. (13% of the NRA) vacating the property at lease expiration in November 2019. The decline in NOI was driven by declined rent revenue and increased operating expenses. According to the March 2022 rent roll, Henkel Corporation (42.2% of the NRA) extended their lease to November 2030. The rent roll reflects a pre-determined downsize of space of approximately 12,000 sf starting in August 2023, which reduces the annual rental revenue by approximately 25%. but appears to be paying reduced rent from August 2023 through August 2027.
Fitch modeled loss of 14% reflects a cap rate of 9.5% and a 25% stress to YE 2021 NOI to account for the reduction in space of the largest tenant.
Improved Credit Enhancement (CE): As of the August 2022 distribution date, the pool's aggregate principal balance has paid down by 35.3% to $553.8 million from $856.3 million at issuance. Eight loans (27.1%) have been fully defeased including Southdale Center (8.5%), the largest loss contributor among the performing loans at the prior review. Seven loans (52.6%) are partial IO, all of which have begun amortizing. Interest shortfalls are currently affecting classes D, E, F, G, and J.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade to the 'AAAsf' rated classes is considered unlikely due to their senior positions in the capital structure, unless classes are impacted or vulnerable to interest shortfalls. The 'A'sf rated class is expected to be paid in full by performing loans at maturity, and will continue to benefit from scheduled amortization. Further downgrade to classes A-S may occur as expected losses on Westfield Countryside and/or the Mall at Tuttle Crossing becomes more certain and/or increase from current estimates. Further downgrades to classes B, C, PST, D, E and F would occur as losses are realized.
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:
An upgrade of classes A-4 and X-A would only occur with significant improvement in CE and/or defeasance but would be limited while Westfield Countryside and the Mall at Tuttle Crossing remain in special servicing. Classes would not be upgraded above 'Asf' if there is a likelihood for interest shortfalls. An upgrade to classes A-S, B, C, PST, D, E and F is considered to be unlikely unless the specially serviced loans liquidate with recoveries well above expectations and the performance of FLOCs stabilize.
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.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
MACY'S, INC. 
