DBRS Confirms Ratings of CMLS Issuer Corp., Series 2014-1

DBRS Limited (DBRS) has today confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2014-1 issued by CMLS Issuer Corp., Series 2014-1 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
-- Class X at AAA (sf)

The trends on all classes remain Stable.

The rating confirmations specifically address the decline in the DBRS underwritten net cash flow (UW NCF) since issuance on the ninth-largest loan in the pool, the Clearwater Suites loan (Prospectus ID#9, 3.50% of the current pool balance), which is secured by a full-service hotel in Fort McMurray, Alberta.

The trust balance is the A1 piece of a pari passu whole loan balance, with the A2 piece having been recently securitized in the CCMOT 2015-3 transaction. During the time between securitizations of the two pari passu pieces, the economic climate worsened in Western Canada because of the low price of oil, specifically in the Fort McMurray market, where the local economy is heavily focused on oil production. This has adversely affected the performance of Clearwater Suites, leading to a trailing 12 months to June 2015 occupancy level of 61.1% compared with 74.1% at issuance, in addition to an average daily rate decline from $210.01 at issuance to $205.95. The decline in the cash flow prompted an update to the DBRS UW NCF from $4.1 million to $3.0 million, a decline of 39.8%. As a result, DBRS updated the CMLSI 2014-1 model to reflect the lower DBRS UW NCF for Clearwater Suites in order to determine the effect on the ratings assigned to the transaction. There were no pool-level rating implications based on the updated DBRS UW NCF for Clearwater Suites.

As of the September 2015 remittance, there is one loan on the servicer’s watchlist. The Toronto Office loan (Prospectus ID#37) is secured a 45,446-square foot office property located in the downtown core of Toronto. The loan was added to the watchlist in May 2015 because of a significant decline in occupancy following a major tenant’s decision to vacate its space. As of YE2014, occupancy at the property was 59.0% compared with 89.0% at issuance. DBRS has contacted the servicer requesting a leasing update and will provide an update when this information has been made available. Although the occupancy rate has declined, the loan still has significant coverage with a YE2014 debt service coverage ratio of 4.81 times.

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 and loans on the servicer’s watchlist. The September 2015 Monthly CMBS 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 Canadian 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 North American CMBS Rating Methodology (June 2015) 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.