Morningstar DBRS Confirms All Classes of Morgan Stanley Capital I Trust 2013-ALTM, Changes Trends on Three Classes to Negative From Stable

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2013-ALTM issued by Morgan Stanley Capital I Trust 2013-ALTM as follows:

-- Class A-2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at BBB (high) (sf)
-- Class D at BB (high) (sf)
-- Class E at BB (low) (sf)

Morningstar DBRS changed the trends on Classes C, D, and E to Negative from Stable. The trends on the remaining classes are Stable.

The Negative trends reflect Morningstar DBRS' opinion that the credit risk profile of the transaction is elevated after the loan transferred to special servicing in January 2025 ahead of its February 2025 maturity date. While a defined workout strategy has yet to be determined, the special servicer noted that the borrower has proposed a loan modification that would extend the loan maturity through 2028. In consideration for the extension, the borrower has offered to pay the loan down by $10 million. While an updated appraisal has yet to be received, Morningstar DBRS expects the value of the subject has declined from issuance. As part of its analysis, Morningstar DBRS conducted a hypothetical liquidation scenario to test the durability of the credit ratings in the event of a value decline. That analysis showed that losses could be realized up to the Class C certificate, discussed further below, supporting the Negative trends on Classes C, D, and E.

The transaction is secured by the fee-simple interest in a 641,000-square-foot (sf) portion of a 1.16 million-sf, two-story, enclosed super-regional mall known as Altamonte Mall, which is in the northern suburbs of Orlando. The 12-year loan had an original principal balance of $160.0 million, with an initial five-year interest-only (IO) period; thereafter, the loan amortizes on a 30-year amortization schedule. The loan began amortizing in 2018 and, as of the May 2025 remittance, reported a balance of $136.8 million, representing a collateral reduction of 14.5% since issuance. The loan is sponsored by a joint venture between the New York State Common Retirement Fund and Brookfield Property Partners L.P. (Brookfield). Brookfield acquired an interest in the property as part of its acquisition of General Growth Properties, Inc. in 2018. Brookfield provides property management services as well.

The property is a prominent shopping destination in North Orlando, primarily serving local patrons, in contrast to other nearby malls that mainly cater to tourists. As of the January 2025 rent roll, the property was 95.5% occupied, relatively unchanged since 2020. Noncollateral anchors include Macy's and Dillard's while collateral anchors include JCPenney (25.1% of the net rentable area (NRA), lease expiry in January 2029) and AMC Theatres (AMC; 11.8% of the NRA, lease expiry in December 2028). As part of the modification terms discussed above the special servicer has requested the extension option for JCPenney be exercised to avoid any potential tenancy issues in the event the loan is modified. Tenant rollover risk is moderate as the leases for approximately 17% of the NRA are scheduled to expire in the next 12 months.

According to the YE2024 tenant sales report, inline tenants occupying less than 10,000 sf reported sales of $700 per square foot (psf), a decline from the December 2023 figure of $750 psf. When excluding Apple's sales, those figures decline to approximately $451 psf and $479 psf, respectively. Sales for AMC were $538,611 per screen as of December 2024, which remain in line with historical figures. Updated tenant sales for JCPenney were not provided, however, as of YE2023, the tenant reported approximate sales of $65 psf, which is a moderate decline from the $69 psf as of September 2023 and below the $77 psf as of YE2021.

Based on the financials for the trailing nine-month period ended September 30, 2024, the annualized net cash flow (NCF) was approximately $14.3 million (representing a debt service coverage ratio (DSCR) of 1.62 times (x)) compared with the NCF of $14.0 million (DSCR of 1.58x) at YE2023 and NCF of $14.3 million (DSCR of 1.61x) at YE2022.

Given the relatively continued stable performance of the collateral, Morningstar DBRS maintained the $168.2 million value derived in 2020 when the credit ratings were assigned; this value was based on the Morningstar DBRS NCF of $13.5 million and a capitalization rate of 8.0%. The Morningstar DBRS value implies an as-is loan-to-value ratio (LTV) of 81.5%. Morningstar DBRS maintained positive adjustments totaling 3.0% to the LTV sizing benchmarks to account for the property's quality build and location in a favorable submarket. As a test of the durability of the credit ratings given the uncertainty associated with the loan's transfer to special servicing and potential loan modification, Morningstar DBRS conducted a hypothetical liquidation scenario. The analysis was based on a stressed value derived from a capitalization rate of 10% and the Morningstar DBRS NCF of $13.5 million while including any outstanding advances, expected servicer expenses, and one year of debt service payments, which cumulatively totalled approximately $11 million. The results of the analysis suggest the hypothetical liquidation could extend losses into the Class C certificate, supporting the Negative trend changes made with this credit rating action.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024): https://dbrs.morningstar.com/research/437781.

Class X-A is an IO certificates 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025) https://dbrs.morningstar.com/research/448963.

Other methodologies referenced in this transaction are listed at the end of this press release.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025),
https://dbrs.morningstar.com/research/448962.

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702.

-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064.

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283.

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at (July 17, 2023), https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.