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

DBRS Limited (DBRS) confirmed the ratings of all classes of the 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-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB 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, when the collateral consisted of 82 fixed-rate loans secured by 184 commercial properties. As at the April 2018 remittance, 80 loans remain in the pool with an aggregate balance of $919.4 million, representing a collateral reduction of 5.6% as a result of loan repayment and scheduled loan amortization. Five loans, representing 3.2% of the pool, are fully defeased.

The pool is concentrated by property type, as 24 loans (42.9% of the pool) are secured by retail properties (including three regional malls, representing 20.4% of the pool), while ten loans (14.3% of the pool) are secured by hotel properties and 12 loans (13.0% of the pool) are secured by office properties. There are seven loans, representing 12.1% of the pool, that were structured with five-year terms and are scheduled to mature in the next 12 months. The most notable upcoming maturities are the two top 15 loans in Soho Beach House (Prospectus ID #2, 5.9% of pool), scheduled to mature in April 2019, and Massillon Industrial (Prospectus ID #12, 2.18% of pool), maturing in May 2019.

To date, 60 loans (60.0% of the pool) have reported year-end (YE) 2017 NCF figures, and 13 loans (35.0% of the pool) have reported partial-year 2017 net cash flow (NCF) figures. As calculated on the most recent financials available (both partial-year and YE 2017 NCF figures), the transaction had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.77 times (x) and 11.5%, respectively, compared with the WA DBRS Term DSCR and DBRS Debt Yield of 1.47x and 9.44%, respectively, for the remaining loans in the pool, as based on the DBRS NCF figures derived at issuance. Based on the most recent NCF figures reported (both partial-year and YE2017), the top 15 loans reported a WA amortizing DSCR of 1.75x, compared with the WA DBRS Term DSCR at issuance of 1.51x, which is reflective of a WA NCF growth of 15.9%.

As at the April 2018 remittance, there are ten loans (12.5% of the pool) on the servicer’s watchlist and there are no loans in special servicing. Of the ten loans currently on the servicer’s watchlist, two loans (2.8% of the pool) were flagged because of deferred maintenance found at the collateral properties, two loans (1.5% of the pool) are secured by hotel properties and were flagged because of deficient performance as a result of seasonality/market conditions and six loans (8.2% of the pool) were flagged because of near-term tenant rollover and/or increased vacancy at the collateral properties. The largest loan on the watchlist, Pacific Design Center (Prospectus ID #4), accounts for 5.4% of the pool and is being monitored for high vacancy and cash flow declines from issuance. Please see commentary in the DBRS Viewpoint platform for further detail.

Classes X-A, X-B, X-C and X-D are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation 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.

For more information on this transaction and supporting data, please log into www.viewpoint.dbrs.com. DBRS will continue to monitor this transaction with periodic updates provided in the DBRS Viewpoint platform.

As part of this review, and as part of the DBRS procedure for transaction reviews three years out from issuance, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for all of the top 15 loans in the transaction as follows:

-- Woodbridge Center (Prospectus ID#1, 12.9% of pool)
-- Montgomery Mall (Prospectus ID#3, 5.9% of pool)
-- Soho Beach House (Prospectus ID#2, 5.9% of pool)
-- Pacific Design Center (Prospectus ID#4, 5.4% of pool)
-- Purgatory Creek Apartments (Prospectus ID#5, 3.4% of pool)
-- Weatherford Ridge (Prospectus ID#6, 3.3% of pool)
-- Harlequin Plaza (Prospectus ID#7, 3.0% of pool)
-- Marketsquare at Montrose (Prospectus ID#8, 2.7% of pool)
-- Delaware State Office Portfolio (Prospectus ID#11, 2.3% of pool)
-- Security Self Storage SPX Portfolio (Prospectus ID#10, 2.3% of pool)
-- Massilon Industrial (Prospectus ID#12, 2.2% of pool)
-- JL Holdings – Burger King Portfolio – 90 (Prospectus ID#9, 2.2% of pool)
-- Orchard Falls (Prospectus ID#13, 2.0% of pool)
-- CT Self Storage Portfolio (Prospectus ID#14, 1.9% of pool)
-- Larkings Corner (Prospectus ID#15, 1.9% of pool)

In addition, DBRS has provided updated commentary for the following non-top 15 loans on the servicer’s watchlist:

-- Hilton Garden Inn – Covington (Prospectus ID #28, 1.0% of the pool)
-- 13140 Coit Road (Prospectus ID #36, 0.8% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

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

The principal methodology is CMBS North American Surveillance, 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.