DBRS Confirms All Classes of COMM 2014-CCRE20 Commercial Mortgage Trust

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2014-CCRE20 (the Certificates) issued by COMM 2014-CCRE20 Commercial Mortgage Trust, as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-E at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class X-F at B (sf)
-- Class G at B (low) (sf)

The Class PEZ certificates are exchangeable with the Class A-M, Class B and Class C Certificates (and vice versa).

All trends are Stable.

The rating confirmations reflect the overall stable performance exhibited since issuance. As of the September 2018 remittance, all 64 loans remained in the pool with an aggregate principal balance of $1,140.3 million, representing a collateral reduction of 3.6% since issuance as the result of scheduled loan amortization. In addition, six loans, representing 3.7% of the pool, are fully defeased. Loans representing 94.0% of the pool reported year-end (YE) 2017 financials. These loans reported a weighted-average (WA) debt-service coverage ratio (DSCR) and debt yield of 2.00 times (x) and 11.3%, respectively. Based on the servicer’s most recent reporting, the 15 largest loans reported a WA net cash flow growth of 22.7% over the DBRS issuance figures, with a WA DSCR and debt yield of 2.04x and 11.2%, respectively.

As of the September 2018 remittance report, there are six loans, representing 6.9% of the pool, on the servicer’s watchlist and one loan, representing 1.2% of the pool, in special servicing. Of these loans, a few are noteworthy for increased risks as compared with the issuance profiles, with the DBRS loan analysis adjusted accordingly for each as part of this review. DBRS expects the loan in special servicing will be returned to the master servicer in the near term, as discussed below.

The CSRA MOB Portfolio II (Prospectus ID#24, 1.2% of pool) loan, secured by a portfolio of two single-tenant office buildings in Hartford, Wisconsin, and Mechanicsville, Virginia, transferred to special servicing in June 2018 due to the borrower’s non-compliance with cash management provisions. Cash management was to be triggered after the portfolio’s largest tenant, API Healthcare (API; 78.6% of the portfolio NRA, 100% of the NRA at the API Headquarters building in Hartford; lease expires November 2025) vacated in late 2016 after it was purchased by General Electric; however, the servicer does not appear to have been aware of these developments until March 2018, with the cash sweep initiated with the April 2018 loan payment. The loan has remained current since the loan’s transfer to special servicing. The inspector’s comments in the servicer’s March 2018 site inspection noted GE Healthcare was using part of the space to store servers, with only the office space not in use. This may provide insight into the source of the dispute between the servicer and the borrower with regard to the cash flow sweep provisions; DBRS has requested clarification from the servicer and the response is pending.

As of July 2018, General Electric sold API to the private equity firm Veritas Capital (Veritas), which is based in New York and has $8.8 billion in assets under management as of September 2018. Following the sale, news reports have confirmed Veritas plans to return the API subsidiary to the Hartford location by the end of September 2018. DBRS anticipates the loan will return to the master servicer in the near term if these developments play out as reported. In the analysis for this loan, DBRS applied a sponsor strength penalty to increase the probability of default (POD) as the loan is in technical default. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

Out of the six watchlist loans, only one is being monitored for a low DSCR in DoubleTree Beachwood (Prospectus ID#12, 2.3% of pool), which is secured by a full-service hotel located in Beachwood, Ohio, approximately 20 miles east of downtown Cleveland. The loan reported a YE2017 DSCR of 0.84x, a decrease from the YE2016 DSCR of 1.02x and the DBRS Term DSCR at issuance of 1.18x. Due to increased competition in the market, the hotel has seen significant declines in both occupancy and RevPAR, lagging behind its competitive set as well as its figures reported at issuance. A new director of sales was hired and renovations were completed for the hotel’s restaurant, lounge area and meeting and banquet rooms in order to improve marketability. Due to disruptions caused by the renovations, along with the loss of a major account to the downtown market, occupancy fell by 13% for the trailing 2 months period ending March 2018. The borrower expects traffic to pick up in the fall of 2018. Although the sponsor’s commitment to the property in the recent renovations and coverage of debt service shortfalls out of pocket in 2017, the increased competition and sustained performance declines show a significantly increased risk profile for this loan as compared with issuance. As such, DBRS applied a stressed cash flow scenario to significantly increase the POD in the analysis for this loan. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

Classes X-A, X-B, X-C, X-D, X-E and X-F 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 the following loans in the transaction:

-- Crowne Plaza Houston Katy Freeway (Prospectus ID#9, 2.7% of pool)
-- DoubleTree Beachwood (Prospectus ID#12, 2.3% of pool)
-- CSRA MOB Portfolio II (Prospectus ID#24, 1.2% of 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 North American CMBS 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.