DBRS Confirms All Classes of COMM 2014-TWC Mortgage Trust

DBRS Limited (DBRS) has today confirmed all classes of COMM 2014-TWC Mortgage Trust as follows:

-- Class A at AAA (sf)
-- Class X-CP at AAA (sf)
-- Class X-EXT 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 (low) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations are reflective of the stable performance of the transaction since issuance. The trust loan is secured by the fee interest in two office condominium units, totaling 1.1 million square feet (sf) within the larger 2.86 million sf Time Warner Center, a Class A mixed-use complex in Manhattan, New York. The collateral consists of 19 floors in the South Tower and six floors in the North Tower and is located on the southwest corner of Central Park. The subject is considered to be a trophy-quality Class A office property offering views of the park from all floors. The complex also offers a variety of shops and restaurants, including the Shops at Columbus Circle and The Restaurant and Bar Collection, as well as the Mandarin Oriental, a five-star luxury hotel. Built in 2003, the building is in excellent condition and provides highly efficient and modern office space for tenants.

As of YE2015, the loan reported a DSCR of 2.46 times and was 100% occupied by Time Warner Realty Inc. (Time Warner Realty) and Time Warner Cable; however, Time Warner Realty, which occupies 87.6% of the net rentable area (NRA), will vacate the subject at lease expiry in January 2019, ahead of the fully extended loan maturity date in February 2020. Time Warner Realty’s departure from the subject was known at issuance and the loan is structured with an ongoing cash trap to be used as a future leasing reserve. As of September 2016, the reserve balance was confirmed at $36.7 million. By the time Time Warner Realty’s lease matures, the reserve is projected to have a balance of $67.1 million. As of September 2016, the borrower had already begun actively searching for a replacement tenant(s). The expected total Tenant Improvement or Leasing Cost (TI/LC) required to release the space is estimated at approximately $149.1 million.

The remaining 12.4% of the NRA is occupied by Time Warner Cable. The tenant will be vacating its space at lease expiry in December 2016 and will relocate to Stamford, Connecticut, where its parent company (Charter Communications) is located. As of September 2016, the borrower has been actively pursuing a replacement tenant(s) and has had productive dialogue with several perspective tenants. The sponsor anticipates spending approximately $153 psf in TI/LC to re-let the space. Due to the specialized nature of the Time Warner Cable space, DBRS underwrote an additional $30 psf above and beyond the typical $60 psf TI/LC allowance to account for demolition costs when the space is re-leased. The tenant currently pays a gross rental rate of $104.02 psf, which is above the Columbus Circle submarket average of $68.47 psf gross reported by CoStar. Time Warner Center is widely regarded as one of the highest-quality assets in the city, as well as one of the most expensive properties developed in the United States. Given the location and views of Central Park, the collateral competes with a small number of highly desirable trophy properties in the submarket, justifying the rental premium when compared with the submarket rental rates.

The loan served as acquisition financing for the loan sponsors The Related Companies, L.P. (Related), Government of Singapore Investment Corporation and Abu Dhabi Investment Authority, which acquired the subject for $1.31 billion. Including closing costs, there remained $669 million of cash equity behind the $675 million mortgage loan. Sponsorship is considered strong, as all three sponsors have significant financial resources. In addition, Related has extensive experience and knowledge of the market as a commercial real estate developer and operator in Manhattan.

Given the excellent location and experience of the sponsors, DBRS expects the subject property to attract an array of potential tenants ahead of the Time Warner Realty Inc. lease expiration. The loan is also structured with a cash flow sweep for future closing costs.

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 North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 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.