DBRS Assigns Provisional Ratings to COMM 2014-TWC Mortgage Trust

DBRS has today assigned provisional ratings for the following classes of COMM 2014-TWC Mortgage Trust. The trends are Stable.

-- Class A at AAA (sf)
-- Class X-CP at AAA (sf)
-- Class X-EXT at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)

The collateral for the transaction consists of the fee interest in two office condominium units totaling 1.1 million sf within a larger 2.86 million sf mixed-use complex. The collateral is located within both of the towers of the larger complex, with 19 floors in the South Tower and six floors in the North Tower. It is currently 100% occupied by Time Warner Realty Inc. (Time Warner Realty) and Time Warner Cable. Time Warner Realty, which occupies 87.6% of the NRA, will be leaving the subject property after its lease expiry in 2019. Time Warner Inc., which is rated investment grade, guarantees the Time Warner Realty lease. The loan served as acquisition financing for the loan sponsors – The Related Companies, L.P.; Government of Singapore Investment Corporation; and Abu Dhabi Investment Authority – which acquired the subject for $1.31 billion. Including closing costs, there will be $669 million of cash equity behind the $675 million mortgage loan.

The subject is a trophy-quality Class A office property with an excellent location at the southwest corner of Central Park. As the property was built only 11 years ago in 2003, it is in very good condition and provides highly efficient, modern office space for high-end users. Unique attributes of the subject include Central Park views, shops and restaurants within the complex located in the Shops at Columbus Circle and extremely high ceiling heights on several floors. In addition, the three loan sponsors – Related, GIC and ADIA – are all considered strong. While all three have significant financial resources, Related is an experienced commercial real estate operator with deep knowledge of the Manhattan market.

During the fully-extended six-year loan term, there is 100% tenant rollover. Moreover, the largest tenant (Time Warner, 87.6% of NRA) is already known to be leaving at expiry (or shortly thereafter) for Related’s Hudson Yards development. While Time Warner Cable (12.4% of NRA) may ultimately stay at the property, its intentions are currently unknown. There is a significant amount of cash equity ($669 million) behind the subject loan, resulting in a loan-to-basis ratio of only 50.2%. This high level of cash investment heavily incentivizes the loan sponsors to carry the property should there be any debt service shortfalls once both tenants have expired (if the debt service reserve is depleted). Although the loan structure allows for significant leakage of cash flow to the borrower during the loan term, as the monthly cash flow sweep test allows for $43.2 million annualized to be released to the borrower, DBRS anticipates that there will be $67.1 million swept into the leasing reserve. DBRS estimates that re-leasing the collateral to a 92.5% occupancy rate will cost $135.8 million. After giving credit to a portion of the $67.1 million to be swept prior to expiry of both leases, DBRS is deducting $78.8 million from the value against which its sizing hurdles are applied.

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

All classes are privately placed pursuant to Rule 144a. The Class X balances are notional.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.