DBRS Confirms Ratings on FREMF 2014-K38 Mortgage Trust, Series 2014-K38

DBRS Limited (DBRS) has today confirmed ratings on the following classes of Multifamily Mortgage Pass-Through Certificates, Series 2014-K38 (the Certificates) issued by FREMF 2014-K38 Mortgage Trust, Series 2014-K38 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X1 at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)

DBRS has assigned a Positive trend to Class B; all other trends are Stable. DBRS does not rate the first loss piece, Class D.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS’s expectations since issuance. At issuance, this transaction consisted of 105 loans and a total trust balance of approximately $1.24 billion. As of the March 2017 remittance report, the trust balance was $1.21 million, representing collateral reduction of 2.4% from issuance as the result of scheduled amortization, with all of the original loans remaining in the pool.

Loans representing 99.1% of the current pool balance are reporting YE2015 figures, with a weighted-average (WA) debt service coverage ratio (DSCR) and a WA debt yield of 1.68 times (x) and 10.4%, respectively. At issuance, the pool was reporting a WA DSCR of 1.51x, and a WA debt yield of 9.1%. The WA net cash flow growth at YE2015 for the top 15 loans was 11.7% over the DBRS issuance figures with a WA DSCR of 1.60x, compared with the WA DBRS issuance DSCR of 1.42x. These positive cash flow trends and overall stable performance of the transaction combine to support the Positive trend assignment for the Class B certificates.

As of the March 2017 remittance report, there are three loans, representing 3.8% of the pool, including one loan in the top 10, on the servicer’s watchlist. There are no loans in special servicing. Two of the three loans on the watchlist, representing 3.61% of the pool, report healthy DSCR figures.

At issuance, DBRS shadow-rated one loan, Knickerbocker Plaza (Prospectus ID #2), representing 4.7% of the current pool balance, investment-grade, given the desirable property location, strong occupancy, long-term ownership and high DBRS exit debt yield. DBRS has today confirmed that the performance of this loan remains consistent with investment-grade characteristics.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans, as well as for the largest 15 loans in the pool in the DBRS CMBS IReports platform. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please log into DBRS CMBS IReports at www.ireports.dbrs.com.

The rating assigned to Class B differs from the higher rating implied by the Large Pool Multi-borrower Parameters. DBRS considers this difference to be a material deviation from the methodology and, in this case, the ratings reflect the sustainability of loan performance trends not demonstrated.

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.

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

The principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

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