DBRS Finalizes Ratings on COMM 2014-UBS3 Mortgage Trust

DBRS has today finalized the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-UBS3 issued by COMM 2014-UBS3 Mortgage Trust. The trends are Stable:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M 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 B at AA (sf)
-- Class PEZ at A (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (high) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

Classes X-B, X-C, X-D, D, E, F, G and H 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-M, 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-M, Class B and Class C certificates.

The collateral consists of 49 fixed-rate loans secured by 81 commercial properties, comprising a total transaction balance of $1,056,012,293. The DBRS sample included 23 loans, representing 81.8% of the pool. The pool has a high concentration of properties located in urban markets (30.6% of the pool), which have increased liquidity and benefit from a larger investor, consumer and tenant base, even in times of stress. The pool has an average loan balance of $21.6 million, which is higher than the average loan balance of $18.1 million for CMBS 2.0 deals. Historically, loans with higher balances have experienced significantly lower loss severities than smaller loans. The term default risk is moderate, as indicated by a strong DBRS Term debt service coverage ratio (DSCR) of 1.47 times (x). In addition, 46.3% of the pool has a DBRS Term DSCR in excess of 1.50x, including seven of the ten largest loans.

The pool is concentrated by loan size as the top ten loans represent 61.7% of the overall pool balance, and the pool has a concentration level similar to a pool of 20 equal-sized loans. However, nine loans are secured by multiple property portfolios, which enhances diversity at the loan level. Twenty-eight properties, representing 19.4% of the pool, are leased to single tenants (or predominantly to single tenants). The largest loan secured by a single-tenant property represents a 14-property portfolio leased to State Farm Insurance, which is rated investment grade. The loan benefits from an anticipated repayment date structure that will allow the loan to amortize by approximately 23% by final lease expiry. The transaction has a high concentration of loans (17 loans, representing 52.1% of the pool) with DBRS Refi DSCRs below 1.00x, and six loans, representing 31.4% of the pool, with a DBRS Refi DSCR below 0.90x. These DSCRs are based on a weighted-average stressed refinance constant of 9.8%, which implies an interest rate of 9.3%, amortizing on a 30-year schedule. This represents a significant stress of 4.5% over the weighted-average contractual interest rate of the loans in the pool.

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.