DBRS Confirms Ratings of WFCM Commercial Mortgage Trust 2014-LC16

DBRS Limited (DBRS) has today confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2014-LC16 (the Certificates) issued by Wells Fargo Commercial Mortgage Trust 2014-LC16 as follows:

-- 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-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S 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 (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class G.

The current performance of the transaction is in line with DBRS expectations at issuance in May 2014. The collateral consists of 82 fixed-rate loans secured by 187 commercial and multifamily properties. As of the February 2015 remittance, the pool has an aggregate balance of $969 million, representing a collateral reduction of approximately 0.5% since issuance as a result of scheduled loan amortization. The pool is diverse based on loan size, as the largest 15 loans only account for 55.5% of the current pool balance. However, the pool is concentrated by property type, as 26 loans, representing 42.6% of the current pool balance, are secured by retail properties. As of the February 2015 remittance report, there are two loans on the servicer’s watchlist, representing 1.9% of the current pool balance. These loans are highlighted below.

BLG Industrial (Prospectus ID#22, 1.40% of current pool) is secured by a 600,000-square foot industrial property located in Vance, Alabama. The building was constructed in 2004 and renovated during 2007. The loan was placed on the servicer’s watchlist with the February 2015 remittance because of a low debt service coverage ratio (DSCR), which was 0.54 times (x) at Q3 2014. The decline in performance is the result of a four-month rent abatement period given to ARD Logistics, which signed a seven-year lease for 49.2% of the net rentable area (NRA) in February 2014. The rent abatement period ended in June 2014, and the tenant is now paying full rent. The other 50.8% of the NRA is occupied by BLG Logistics through January 2021. DBRS expects loan performance to improve, as the subject is 100% occupied and both tenants are paying full rent.

134 Golden Gate Avenue (Prospectus ID#66, 0.46% of the current pool) is secured by a 29,992-square foot office property located in San Francisco, California. The building was originally constructed in 1917, but it underwent a substantial renovation during 2000. The loan was placed on the servicer’s watchlist with the February 2015 remittance because of a low DSCR, which was 0.65x at Q3 2014. The temporary loss in rental revenue was the result of the subject’s becoming 100% vacant after two former tenants departed in order for the new single tenant, Larkin Street Youth Services (Larkin), to take possession of the space. At issuance, Larkin signed a 15-year triple net lease beginning in September 2014. The borrower also provided Larkin $275,000 in tenant improvement allowances to build out its space. The loan was structured with a $2.0 million holdback until Larkin assumed its space and commenced paying full rent. As Larkin is now in possession of its space and paying full rent, the holdback has been released and property performance is expected to stabilize.

The DBRS analysis included an in-depth review of the 15 largest loans in the transaction, as well as the loans on the servicer’s watchlist, which collectively represent 57.5% of the current pool balance.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool. The February 2015 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.