Fitch Affirms Wells Fargo Commercial Mortgage Trust 2013-LC12 Certificates.
KEY RATING DRIVERS
The affirmations are based on the stable performance of the underlying collateral pool. As of the April distribution, the pool's aggregate principal balance has been paid down by 2.59% to $1.37 billion from $1.41 billion at issuance. Based on the annualized and full year 2015 reported net operating income (NOI) of the 98.8% of the pool that reported, the pool's overall NOI has improved 10.1% since issuance and 5.3% higher than 2014 reported NOI.
There are currently no delinquent or specially serviced loans and eight loans on the servicer watchlist (10.2%). No loans are currently defeased. Four of the properties on the watchlist are encountering occupancy issues that were anticipated at issuance and represent minimal asset risk. The remaining four properties are on the servicer watchlist for deferred maintenance issues that are expected to be addressed by the respective sponsors.
Concentrations in the pool include 14.4% full-term interest-only loans and 48.2% partial-term interest-only. The transaction is primarily composed of four real estate sectors encompassing retail (40.2%), office (21.6%), manufactured housing (13.2%), and lodging (11.7%). The transaction's retail concentration includes five retail loans in the top 15 (26.6%), four of which are regional malls (24.6%). Furthermore, significant sponsor concentration exists with General Growth Properties and RHP Properties Inc. comprising 30.4% of the pool.
The largest loan in the pool (7.3%) is secured by a portfolio of 13 suburban office properties, Innsbrook Office Portfolio, located in the Richmond, VA MSA, 20 miles northwest of the central business district. The portfolio's rent roll is diversified with 96 unique tenants. Two tenants, The Hanover Insurance Company and Wells Fargo which occupy 2.1% and 4.5% of the total NRA respectively, recently exited their leasable space during the first quarter of 2016. Two more tenants, Capital One and AT&T which occupy 13.6% and 3.2% of the total NRA respectively, are scheduled to vacate their premises during the second half of 2016. The resulting expected portfolio occupancy is approximately 81%. The possible tenant exits were contemplated at issuance and a leasing reserve of $1.5 million, as well as ongoing leasing reserves, were established to mitigate portfolio risk and fund leasing costs to backfill the space. Fitch's analysis was based on a stressed full year 2015 NOI adjusted to reflect the tenant exits, as well as a stressed cap rate.
The second largest loan, Carolina Place (6.6%), is a 1.2 million square foot regional mall located 10 miles southwest of the Charlotte CBD. The loan is sponsored by a joint venture between General Growth Properties and the New York State Common Retirement Fund. The mall has undergone two rounds of redevelopment in less than 10 years and is the dominant property in the South Charlotte/North Rock Hill trade area. A newly constructed property by Simon Properties and Taubman, Carolina Premium Outlets, opened at the end of the July 2014. This property is located 10 miles from the subject on a site that is in close proximity to Interstate 485 and 77. The opening of the center appears to have had limited negative impact on Carolina Place's 2015 tenant sales. A second phase of development is projected to begin shortly that will add an additional 50,000 sf of retail space. Simon properties dominant retail center in the Charlotte market, South Park Mall, is currently expanding its footprint and is expected to open a new H&M anchor in 2016. Fitch will monitor the renewal activity at the property along with any further negative impacts from the opening of the Premium Outlet and South Park redevelopment.
Fitch is monitoring the performance of the sixth largest loan, Rimrock Mall (5.6%), which is a 702,317-sf regional mall, located in Billings, MT. The loan is sponsored by Starwood Capital Group. The property is anchored by JC Penney, Dillard's, and Dillard's Men & Children. As of December 2015, the servicer reported total mall occupancy fell to 79% from full occupancy at year end 2013. Several in-line tenants, including Wet Seal, Abercrombie and Fitch, Deb Shop, Aeropostle, and Gap vacated in 2015. The sponsor is looking to backfill a significant portion of the vacancy with H&M and Lane Bryant during the 2016 calendar year. Fitch's analysis was based on a stressed full year 2015 NOI which reflected the decrease in occupancy and a stressed cap rate. Fitch will continue to monitor the loan's performance as the Billings, MT region's economic activity is related to the oil and gas industry.
Fitch used a deterministic stress in its analysis of the pool. The Rating Outlook for all classes remains Stable as overall performance of the transaction is as expected. Fitch will continue to monitor the property type and sponsor concentrations as well as the performance of the Fitch loans of concern. If pool performance deteriorates, negative rating implications are possible.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch affirms the following classes:
--$94 million Class A-1 at 'AAAsf'; Outlook Stable;
--$80 million Class A-2 at 'AAAsf'; Outlook Stable;
--$160 million Class A-3 at 'AAAsf'; Outlook Stable;
--$363.1 million Class A-4 at 'AAAsf'; Outlook Stable;
--$149.9 million Class A-SB at 'AAAsf'; Outlook Stable;
--$103(#)(a) million Class A-3FL at 'AAAsf'; Outlook Stable;
--$0.0a million Class A-3FX at 'AAAsf'; Outlook Stable;
--$116.3(b) million Class A-S at 'AAAsf'; Outlook Stable;
--$88.1(b) million Class B at 'AA-sf'; Outlook Stable;
--$56.4(b) million Class C 'A-sf'; Outlook Stable;
--$260.7(b) million Class PEX at 'A-sf'; Outlook Stable;
--$976.8(*) million Class X-A at 'AAAsf'; Outlook Stable;
--$66.9(a) million Class D at 'BBB-sf'; Outlook Stable;
--$28.2(a) million Class E at 'BBsf'; Outlook Stable;
--$14.1(a) million Class F at 'Bsf'; Outlook Stable.
Fitch does not rate class G or the interest-only class X-B. The rating on class A-5 was withdrawn.
# Floating rate.
* Notional amount and interest-only.
a Privately placed pursuant to Rule 144A.
b Class A-S, Class B and Class C certificates may be exchanged for Class PEX certificates; and Class PEX certificates may be exchanged for Class A-S, Class B and Class C certificates.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||May 11, 2016|
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