DBRS Assigns Provisional Ratings to Citigroup Commercial Mortgage Trust 2014-GC19

DBRS has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-GC19 (the Certificates), to be issued by Citigroup Commercial Mortgage Trust 2014-GC19. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (high) (sf)
-- Class PEZ at AA (low) (sf)
-- Class C at AA (low) (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at BB (low) (sf)

Classes X-C, X-D, D, E and F have been privately placed pursuant to Rule 144A.

The Class X-A, X-B, X-C and X-D balances are notional. DBRS ratings on interest-only certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the interest-only certificates’ position within the transaction payment waterfall when determining the appropriate rating.

Up to the full certificate balance of the Class A-S, Class B and Class C certificates may be exchanged for Class PEZ certificates. Class PEZ certificates may be exchanged for up to the full certificate balance of the Class A-S, Class B and Class C certificates.

The collateral consists of 78 fixed-rate loans secured by 128 commercial properties, comprising a total transaction balance of $1,016,313,708. The DBRS sample included 36 loans, representing 74.7% of the pool. The pool has a high concentration of properties located in urban markets (32.2% of the pool), which benefit from a larger investor, consumer and tenant base, even in times of stress. The pool is relatively diverse based on loan size, with the concentration level similar to a pool of 29 equal-sized loans, despite the largest loan representing 9.96% of the pool. Increased pool diversity helps to insulate the higher-rated classes from event risk. The transaction also has a minimal hotel concentration, with only two limited-service hotels represented in the deal, totaling a combined 1.4% of the pool. Hotel properties have higher cash flow volatility than traditional property types, and underlying revenue can fall swiftly during a downturn and cash flow can fall even faster because of the high operating leverage.

The transaction’s largest loan, Newcastle Senior Housing Portfolio (10.0% of the pool) consists of 26 independent senior living facilities run by a single operator. While no health-care services are provided by the properties, it is an operator-intensive business with significant value attributed to non-real estate-related services. To account for the unique risks associated with independent living facilities, DBRS models loans backed by independent living facilities with a significantly higher cash flow volatility, probability of default (POD) and loss severity than a loan secured by a multifamily property to account for the elevated risk. Approximately 21.7% of the pool is secured entirely or in part by multifamily properties, which is unique for a non-agency conduit transaction and above the concentration level of other recently rated DBRS conduit transactions. Additionally, a high percentage of loans within the pool (20.5%) have sponsorship and/or loan collateral associated with a prior voluntary bankruptcy filing, limited liquidity, a historical negative credit event or minimal experience with the respective property type. DBRS increased the POD for loans with identified sponsorship concerns.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

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

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 Other Research or by contacting us at info@dbrs.com.

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