DBRS Confirms All Ratings for LCCM 2014-909 Mortgage Trust

On June 14, 2018, DBRS amended the notes section of this press release and the principal methodology listed for this transaction.

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates (the Certificates) issued by LCCM 2014-909 Mortgage Trust as follows:

-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (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)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The loan is secured by 909 Third Avenue, a 32-story, 1.3 million square foot (sf) Class A LEED Gold-certified office building located in the prestigious Plaza District submarket in Midtown Manhattan, New York. The loan is sponsored by Vornado Realty Trust, which has an ownership or management interest in over 20 million sf of office space in Manhattan. The property benefits from a concentration of investment-grade tenants, including the largest three tenants who collectively occupy 66.3% of the net rentable area (NRA).

As at the October 2017 rent roll, the collateral was 97.5% occupied, with an average base rental rate of $33.81 per square foot (psf), down slightly from the YE2016 occupancy rate and average rental rate of 99.8% and $34.63 psf, respectively. The decrease in occupancy is due to Morrison Cohen LLP downsizing its space from 72,527 sf to 65,068 sf upon lease renewal in January 2017, as well as the loss of Bloomingdale’s Inc. (1.5% NRA), which vacated the property in December 2016. The subject’s largest tenant, the United States Postal Service, occupies 36.7% of the (NRA through October 2023 and is currently paying a below-market rental rate of $2.23 psf. At issuance, DBRS conservatively estimated a market rental rate of $30.00 psf gross for the entire space, which would result in approximately $9.9 million in additional rental revenue. According to CoStar, the Plaza District submarket reports a 9.6% vacancy rate with an average rental rate of $76.24 psf as of February 2018. Other large tenants include CMGRP Inc. (17.2% of NRA, lease expires February 2028) and Forest Laboratories (12.5% of NRA, lease expires January 2027). There is no scheduled rollover in 2018.

According to Q3 2017 financials, the loan reported a debt service coverage ratio (DSCR) of 1.82 times (x), a decline from 1.94x as at YE2016 and 2.13x as at YE2015. Cash flows in the last year have been slightly depressed due to rent abatements and credits given to new and renewing tenants. DBRS estimates the DSCR improves to 2.13x once all in-place rents are factored in and rent steps through the next six months are included. At issuance, the DBRS Term DSCR was 2.03x.

Classes X-A and X-B are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

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

The principal methodology is CMBS North American Surveillance Methodology, which was utilized in conjunction with North American Single-Asset/Single-Borrower Methodology, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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