DBRS Confirms Ratings on COMM 2014-LC15 Mortgage Trust, Changes Trend on Class F to Negative

DBRS Limited (DBRS) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2014-LC15 (the Certificates) issued by COMM 2014-LC15 Mortgage Trust (the Trust) as follows:

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

All trends are Stable with the exception of Class F, whose trend DBRS changed to Negative from Stable. DBRS does not rate the first loss piece, Class G.

The trend change on Class F to Negative reflects the concern surrounding the McKinley Mall loan (1.1% of the pool), which is secured by a 728,133-square foot (sf) portion of an 846,847 sf regional mall in Hamburg, New York. The loan became delinquent in June 2018 after three anchor tenants vacated the subject, with the remaining two tenants, Sears and JCPenney, currently still in place. The property received an updated valuation in July 2018 at $15.0 million ($21 psf), down from $56.5 million ($78 psf) at issuance, suggesting the trust will experience a significant loss with the ultimate resolution of the loan.

The rating confirmations reflect the overall stable performance of the transaction. At issuance, the collateral consisted of 48 fixed-rate loans secured by 197 commercial properties. As of the November 2018 remittance, 45 loans remained in the pool with an aggregate principal balance of $867.1 million, representing a collateral reduction of 4.1% as a result of scheduled loan amortization, the successful repayment of two loans and the liquidation of one delinquent loan, which resulted in a trust loss of $3.4 million in August 2018.

To date, 39 loans (93.7% of the pool) have reported partial-year 2018 financials, while 44 loans (99.0% of the pool) reported YE2017 financials. Based on the most recent year-end financial reporting, the transaction had a weighted-average (WA) debt service coverage ratio (DSCR) and WA Debt Yield of 1.53 times (x) and 10.3%, respectively, which remained relatively flat year over year. In comparison, the DBRS WA Term DSCR and WA Debt Yield at issuance were 1.37x and 9.1%, respectively. Cash flow growth for the top 15 loans is more pronounced, as the YE2017 WA DSCR for these loans was 1.49x, which reflects a WA net cash flow growth of 14.4% over the DBRS issuance figures. The pool also benefits from defeasance collateral, as one loan, representing 1.0% of the pool, is fully defeased. Additionally, two loans representing, 11.8% of the pool, are scheduled to mature in Q1 2019. Both loans are located in Manhattan, New York; however, each has an exit debt yield below 8.0% based on the most recently reported cash flow. According to servicer reporting, it will provide maturity updates as available as neither borrower has confirmed it has secured refinance capital at this time.

As of the November 2018 remittance, there are three loans (2.7% of the pool) in special servicing and ten loans (29.6% of the pool) on the servicer’s watchlist. Two loans in special servicing, the previously mentioned McKinley Mall (Prospectus ID#22, 1.1% of pool), and Holiday Inn Express Snyder (Prospectus ID#33, 0.6% of the pool) are delinquent and are expected to be resolved with a loss to the trust. The other specially serviced loan, Moss-Bauer Apartments (Prospectus ID#24, 1.0% of pool) transferred after the borrower did not comply with cash management provisions. The borrower is now being cooperative, and the special servicer has identified a resolution strategy. Of the ten loans on the servicer’s watchlist, two loans (11.8% of pool) were flagged for upcoming maturity, three loans (3.6% of the pool) were flagged for deferred maintenance, and the remaining five loans (16.8% of the pool) were flagged because of either occupancy declines and/or near-term tenant rollover.

Classes X-A, X-B and X-C 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 – One Kendall Square (9.5% of pool)
-- Prospectus ID#5 – Akers Mill Square (6.4% of pool)
-- Prospectus ID#22 – McKinley Mall (1.1% of pool)
-- Prospectus ID#24 – Moss-Bauer Apartments (1.0% of pool)
-- Prospectus ID#33 – Holiday Inn Express Snyder (0.6% 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 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 principal methodology is North American CMBS Surveillance, 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 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.