DBRS Confirms Ratings of Wells Fargo Commercial Mortgage Trust 2014-LC16, Stable Trends

DBRS Limited (DBRS) has today confirmed the ratings for all classes of Commercial Mortgage Pass-Through Certificates, Series 2014-LC16 (the Certificates), issued by Wells Fargo Commercial Mortgage Trust 2014-LC16 (the Trust) 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 B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-B at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-D at B (high) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance exhibited since issuance in 2014. At issuance, the collateral consisted of 82 fixed-rate loans secured by 184 commercial properties. As of the April 2017 remittance, 81 loans remained in the pool with an aggregate principal balance of $938 million, representing a collateral reduction of 3.7% as a result of loan repayment and scheduled loan amortization. One loan, Hermitage Garden Apartments (Prospectus ID#81, 0.2% of the pool), is fully defeased.

The pool is concentrated by property type, as 24 loans, representing 41.1% of the pool, are secured by retail properties (including three regional malls, representing 20.2% of the pool), 13 loans (18.2% of the pool) are secured by office properties and 11 loans (16.4% of the pool) are secured by hotel properties (representing 75.7% of the pool). The largest loan, Woodbridge Center (Prospectus ID#1), represents 12.8% of the pool, however, by loan size, the pool is rather diverse with respect to loan size as the Top 10 and Top 15 loans represent 46.7% and 56.9% of the pool, respectively. As of YE2016, the Woodbridge Center loan displayed healthy performance metrics with a debt service coverage ratio (DSCR) of 1.43 times (x) compared to the DBRS issuance figure of 1.25x, reflective of a 10.3% net cash flow (NCF) growth. Three loans (9.4% of the pool) are structured with full interest-only (IO) terms, while an additional four loans (10.9% of the pool) have partial IO periods remaining, ranging from 22 months to 24 months.

To date, 65 loans (78.4% of the pool) have reported YE2016 NCF figures, while the remaining 15 loans (21.4% of the pool) have only reported partial-year 2016 NCF figures. As calculated on the most recent financials available (both partial-year and YE2016 NCFs), the transaction had a weighted-average (WA) DSCR and WA debt yield of 1.72x and 11.0%, respectively, compared with the DBRS issuance figures of 1.51x and 9.5%, respectively. Based on the most recent NCF figures (both partial-year and YE2016), the Top 15 loans reported a WA amortizing DSCR of 1.71x, compared with the DBRS issuance figure of 1.51x, which is reflective of a WA NCF growth of 14.3%.

As of the April 2017 remittance, there are eight loans (6.9% of the pool) on the servicer’s watchlist and no loans in special servicing. Of the eight loans currently on the servicer’s watchlist, three loans (3.5% of the pool) were flagged because of deferred maintenance found at the collateral properties, two loans (1.4% of the pool) are secured by hotel properties and were flagged because of poor performance as a result of seasonality/market conditions and three loans (2.0% of the pool) were flagged because of near term tenant rollover and/or increased vacancy at the collateral properties; however, two of the properties (1.2% of the pool) have recently signed leases stabilizing occupancy with historical levels. The eighth watchlisted loan (0.4% of the pool) was flagged as a result of flood damage, for which insurance claims were made and renovations are ongoing.

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. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log in at www.ireports.dbrs.com.

The ratings assigned to Classes B, C and F materially deviate from the higher ratings implied by the quantitative results. The deviations are warranted because sustainability of loan trends has not yet been demonstrated.

For more information on these rating actions, please contact us at info@dbrs.com.

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

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

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