DBRS Changes Trends on Four Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2014-C15 to Positive from Stable

DBRS Limited (DBRS) confirmed the ratings for all classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-C15 (the Certificates) issued by Morgan Stanley Bank of America Merrill Lynch Trust 2014-C15 (the Trust), and changed the trends on Classes B, X-B, C and PST to Positive from Stable. All other trends remain Stable.

The rating confirmations are as follows:

--Class A-SB at AAA (sf)
--Class A-3 at AAA (sf)
--Class A-4 at AAA (sf)
--Class A-S at AAA (sf)
--Class X-A at AAA (sf)
--Class X-B at AA (high) (sf)
--Class B at AA (sf)
--Class C at A (high) (sf)
--Class PST at A (high) (sf)
--Class D at BBB (sf)
--Class E at BBB (low) (sf)
--Class F at BB (sf)
--Class G at BB (low) (sf)
--Class X-C at B (sf)
--Class H at B (low) (sf)

The Positive trends assigned to four classes and the rating confirmations reflect the increased credit support to the bonds resulting from substantial loan repayment since issuance, as well as the overall strong performance of the underlying collateral for the pool. At issuance, the pool consisted of 48 fixed-rate loans secured by 76 commercial properties, with an original trust balance of $1.1 billion. As of the December 2018 remittance, 41 loans remained in the pool with a trust balance of $920.4 million, representing a collateral reduction of 14.8% due to scheduled loan amortization and loan repayments. Approximately 95.1% of the pool reported year-end (YE) 2017 financials and based on the most recent reporting, the pool reported a weighted-average (WA) debt-service coverage ratio (DSCR) of 2.17 times (x) and 13.7%, respectively. At issuance, the pool reported a DBRS WA DSCR and debt yield of 1.75x and 10.4%, respectively.

Based on the most recent reporting, the top 15 loans (80.8% of the pool) reported a WA DSCR and debt yield of 2.33x and 14.6%, respectively, representing WA net cash flow (NCF) growth of 25.5% from DBRS NCF figures at issuance. There are two loans (2.5% of the pool) that are fully defeased. The pool is concentrated by property type as 14 loans (30.1% of the pool) are secured by retail properties, while five loans (24.9% of the pool) are secured by hotel properties. The largest loan in the pool, Arundel Mills & Marketplace (Prospectus ID#1, 14.5% of the pool), is secured by a regional mall located in Hanover, Maryland. The property benefits from a diverse mix of anchor tenants in Burlington Coat Factory, Cinemark and Maryland Live! Casino (on a ground lease through June 2111), and continues to report strong sales as in-line tenants less than 10,000 square feet (sf) reported sales of $463 per sf as of the most recent reporting on file with DBRS, dated December 2016. The mall’s unique tenant mix makes it a popular destination within the larger Baltimore, Maryland, area, with strong sales and stable occupancy performance suggestive of low risk overall.

The largest hotel loan in the pool, La Concha Hotel & Tower (Prospectus ID#3, 7.8% of the pool), is secured by a resort hotel located in San Juan, Puerto Rico. The property was damaged as a result of Hurricane Maria, which hit Puerto Rico in September 2017, but the property was fully operational by early December 2017 and cash flow performance has not been materially impacted by the aftereffects of the storm to date. There was a decline in cash flow performance from 2015 to 2016, largely driven by higher capital expenditures; however, performance rebounded in 2017, with cash flows up by 28.2% from the DBRS estimates derived at issuance. The servicer’s most recently reported figures show a Q3 2018 DSCR of 3.07x, up from 2.17x at YE2017. The property benefits from its location within the premier beachfront destination in San Juan and was ranked in the top 50 for “2018 Best Resorts in the Caribbean” by Conde Nast Traveler’s Readers’ Choice Awards.

As of the December 2018 remittance, there were nine loans (10.5% of the pool) on the servicer’s watchlist; however, four loans (5.4% of the pool) were flagged for deferred maintenance items and overall performance is healthy, as these watchlisted loans reported a WA DSCR and debt yield of 1.47x and 10.0%, respectively. There is one loan on the servicer’s watchlist that DBRS is monitoring closely in 1100 Richmond Office Building (Prospectus ID#33, 0.5% of the pool), which is secured by a Class B office property in Houston, Texas. The property has had a significant decline in occupancy since issuance, as the largest four tenants in place at closing (formerly 42.7% of the NRA) have vacated. One of the larger remaining tenants, Siemens (8.6% of the NRA, expiring May 2019) recently extended their lease by two years and are in negotiations to expand their space. However, given the challenges in the market and the sharp cash flow declines, with a Q3 2018 DSCR of 0.41x, DBRS assumed a highly stressed cash flow scenario for the loan with this review to significantly increase the probability of default.

At issuance, DBRS assigned investment-grade shadow ratings to Arundel Mills & Marketplace (Prospectus ID#1, 16.3% of the pool) and JW Marriott and Fairfield Inn & Suites (Prospectus ID#7, 5.4% of the pool) loans. DBRS confirms with this review that the performance of both loans remains consistent with investment-grade loan characteristics.

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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Arundel Mills & Marketplace (Prospectus ID#1; 16.3% of the pool)
-- La Concha Hotel & Tower (Prospectus ID#3; 8.6% of the pool)
-- JW Marriott and Fairfield Inn & Suites (Prospectus ID#7; 5.4% of the pool)
-- Waterside at Castleton (Prospectus ID#20; 1.5% of the pool)
-- 11000 Richmond Office Building (Prospectus ID#33, 0.6% 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 most outstanding CMBS transactions (including non-DBRS rated), as well as loan level and transaction level commentary for most DBRS rated and monitored 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 & 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.

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