DBRS Confirms All Classes of WFRBS Commercial Mortgage Trust 2014-C25

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2014-C25 issued by WFRBS Commercial Mortgage Trust 2014-C25 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-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 PEX 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.

Up to the full certificate balance of the Class A-S, Class B and Class C certificates may be exchanged for the Class PEX certificates and vice versa.

The rating confirmations are reflective of the overall stable performance of the transaction since issuance. The transaction closed in December 2014, with 59 loans secured by 73 properties and a trust balance of $875.7 million. As of the October 2018 remittance, the pool has seen a collateral reduction of 2.5% since issuance, with all loans remaining in the pool. The DBRS Term debt service coverage ratio (DSCR) and DBRS Debt Yield at issuance were 1.61 times (x) and 9.0%, respectively. As of the YE2017 financials, the weighted-average (WA) in-place DSCR and in-place debt yield were 1.83x and 10.8%, respectively, with 94.4% of the pool reporting. Additionally, 48 loans (representing 90.6% of pool) are reporting partial 2018 financials. The largest 15 loans represent 66.9% of the pool balance and reported a WA DSCR at YE2017 of 1.95x and a WA cash flow growth of 17.5% over the DBRS issuance figures. In addition to the overall healthy cash flow growth from issuance, the pool benefits from defeasance, as six loans (representing 5.6% of the pool) are fully defeased.

There are challenges in one loan in special servicing and seven loans on the servicer’s watchlist, which represent 1.4% and 20.3% of the current pool balance, respectively. Of the loans on the watchlist, three are being monitored for performance-related issues. The largest loan on the watchlist is Colorado Mills (Prospectus ID#2, 11.4% of pool), secured by an outlet mall in Lakewood, Colorado, that was significantly damaged by a hail storm in May 2017. The damage was so significant that the mall was essentially closed for several months following the event, with approximately half of the stores open by Thanksgiving 2017 and approximately 140 of 230 stores open as of August 2018, according to online news stories reviewed by DBRS. As a result of the damage, some tenants have vacated the property, including Neiman Marcus Last Call, a junior anchor who closed its doors for good shortly after the hailstorm hit. In the analysis for this loan, a stressed cash flow scenario was assumed to increase the probability of default to a level reflective of the increased risks given the extended length of time to get the property fully back online and the occupancy declines resulting from these events. A DBRS analyst will be in the area in mid-November and will visit the property to gather information on the number of stores open and evidence of new leasing activity. Those findings will be available on the DBRS Viewpoint platform shortly thereafter, with registration information provided below.

The loan in special servicing, Elsinore Courtyard Apartments (Prospectus ID#20, 1.36% of the pool), was transferred to special servicing for delinquency in May 2017, and as of the October 2018 remittance, has remained delinquent for 19 months. The sponsor was cited for numerous code violations at the property and the Special Servicer has appointed a receiver, E&G Group, who has taken over other properties for the sponsor in the past. The Special Servicer reports that the court has provided approval for the receiver to market the property for sale, a process that has been initiated. The January 2018 appraisal estimated an as-is value of $12.0 million, suggesting a loss is likely at resolution. For this review, DBRS assumed a loss severity in excess of 50%, stressed beyond the severity implied by the current trust exposure and the appraised value, as it is expected buyers will significantly discount bids given the property’s history and the outstanding issues remaining to be resolved. For further information on this loan and the pivotal watchlist loans in the pool, please see the loan commentary in the DBRS Viewpoint platform.

At issuance, DBRS shadow-rated one loan, St. Johns Town Center (Prospectus ID #1, 11.4% of the pool balance), as investment grade, supported by the loan’s strong credit metrics, strong sponsorship strength and historically stable collateral performance. With this review, DBRS confirms that the characteristics of this loan remain consistent with the investment-grade shadow rating.

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.

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:

-- Prospectus ID#1 – St. Johns Town Center (11.4% of the pool)
-- Prospectus ID#2 – Colorado Mills (11.4% of the pool)
-- Prospectus ID#7 – Tobin Lofts (3.9% of the pool)
-- Prospectus ID#17 – Sharon Park (1.9% of the pool)
-- Prospectus ID#20 – Elsinore Courtyard Apartments (1.4% of the pool)
-- Prospectus ID#22 – Southgate Mall (1.3% of the pool)
-- Prospectus ID#28 – 276 Post Road West (1.0% of the pool)
-- Prospectus ID#42 – Sherman Crossroads (0.5% of the pool)
-- Prospectus ID#47 – Lewisville Shopping Center (0.5% 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 North American CMBS Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria. 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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