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)

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

The rating confirmations reflect the current performance of the transaction. The collateral consists of 37 fixed-rate loans secured by 41 commercial properties. As of the November 2015 remittance, the pool has an aggregate balance of approximately $277 million, representing a collateral reduction of 2.2% since issuance due to scheduled loan amortization. According to YE2014 financials, the pool had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.49x times (x) and 10.4%, respectively, compared with the DBRS UW figures of 1.39x and 10.4%, respectively. The transaction benefits from a concentration of loans secured by high-quality properties as DBRS considers two loans, representing 11.6% of the current pool balance, to be secured by properties with Excellent property quality, and an additional four loans, representing 11.3% of the current pool balance, to be secured by properties with Above Average property quality. The transaction also benefits from a high level of loans having some form of meaningful recourse, as twenty-one loans, representing 25.9% of the current pool balance, offer either partial or full recourse to their respective borrowers. The transaction is concentrated as the Top Ten loans represent 64.3% of the overall pool.

On October 15, 2015, DBRS updated the CMLSI 2014-1 model to reflect a lower DBRS UW NCF for the Clearwater Suites loan (Prospectus ID#9, 3.5% of the current pool balance). This loan is secured by a 150-unit full-service hotel located in Fort McMurray, Alberta, which has been adversely affected by the current economic environment given the submarket’s dependency on the oil industry. Please refer to the October 15, 2015, press release for more details regarding this loan.

As of November 2015 remittance, there are no loans in special servicing and two loans on the servicer’s watchlist representing 2.5% of the current pool balance. The largest loan is highlighted in detail below.

The Windsor Shoppers Drug Mart loan (Prospectus ID#16, 1.9% of the current pool balance) is secured by a 16,865 square feet (sf) single-tenant property located in Windsor, Ontario. The loan was added to the servicer’s watchlist as of November 2015 due to a low YE2014 DSCR of 1.01x compared to the DBRS UW DSCR of 1.17x. According to the servicer, there has been a decrease in income and an increase in expenses; however, as the transaction originally closed in December 2014, more up-to-date information will be provided at YE2015. The property is 100% occupied by Shoppers Drug Mart (Shoppers) at a rental rate of $30.47 per square foot (psf). Shoppers’ lease extends through 2030 with no termination options and four five-year renewal options at market rate, which must be exercised six months prior to lease each respective lease expiration. Shoppers was purchased by Loblaw Companies Limited (Loblaw) in March 2014. As of March 25, 2015, DBRS Confirmed Loblaw at BBB with a Stable trend based on performance in 2014 and the company’s continued deleveraging efforts, which should result in strong credit metrics by YE2015. Furthermore, the loan has full-recourse to the borrower, which is a single asset entity owned by a local businessman who operates a construction company focused on property development in both public and private sectors. At issuance, the sponsor had a net worth in excess of $14.5 million.

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.