DBRS Confirms All Classes of COMM 2014-TWC Mortgage Trust

DBRS Limited (DBRS) confirmed the following classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-TWC issued by 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 (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The loan is secured by two office condominium units, totalling 1.1 million square feet (sf), within the larger 2.9 million sf Time Warner Center, 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 a trophy-quality Class A office property offering unobstructed views of the park from all floors. There is significant cash equity of $669 million behind the subject’s $675 million mortgage loan provided by the sponsors that funded the $1.3 billion acquisition of the subject. The sponsor group includes The Related Companies, Government of Singapore Investment Corporation and Abu Dhabi Investment Authority. The loan was structured with a three-year term plus three one-year extension options.

At issuance, the property was 100% occupied by Time Warner Realty (TWR) and Time Warner Cable (TWC); however, it was known at issuance that both tenants would vacate upon their respective lease expirations. TWC vacated the property in December 2016 as it relocated to Stamford, Connecticut (where its parent company, Charter Communications, is located). TWR’s lease is set to expire in January 2019 (ahead of the full extended loan maturity date in February 2020); however, servicer commentary noted TWR is expected to vacate sometime after its lease expiration and eventually move to the new 30 Hudson Yards development. According to the “New York Post,” Deutsche Bank will be moving from its regional headquarters on Wall Street to Columbus Circle and, while no lease information is disclosed, a term sheet has been signed for 1.1 million sf.

Per the March 2018 rent roll, the collateral is 87.5% occupied, following TWC’s recent vacancy, at an average rental rate of $71.75 per sf (psf). As per the loan agreement, the borrower was required to increase the rollover reserve account to $50.0 million at the time of the first loan extension option in early 2017. DBRS confirmed that the current balance of the rollover reserve is $80.0 million. Cushman and Wakefield’s Q1 2018 Marketbeat reports that office properties within the Sixth Avenue/Rock Center submarket reported an average vacancy and asking rent of 8.3% and $85.88 psf, respectively. The sponsor group anticipates spending approximately $25.3 million ($153 psf) in tenant improvement (TI) and leasing costs (LC) for the TWC space and for the TWR space, the expected total leasing package is estimated at $149.1 million ($158 psf). DBRS considered the anticipated leasing costs provided by the servicer and considered the projected reserve balance in its analysis. The sponsor group can lease the space to Deutsche Bank at a rental rate well above market given the superb location and considerable TI and LC projections.

Per the YE2017 financials, the loan reported an amortizing debt-service coverage ratio (DSCR) of 2.39 times (x), in comparison with the YE2016 DSCR of 2.97x and DBRS Term DSCR at issuance of 2.57x. The decline in cash flow performance is attributable to a 12.4% decline in effective gross income resulting from TWC’s vacancy and an 8.4% increase in real estate taxes year over year.

Classes X-CP and X-EXT 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.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan level-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.

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.