DBRS Changes Trend on Two Classes of COMM 2014-UBS3 Mortgage Trust to Negative

DBRS, Inc. (DBRS) changed the trend on Commercial Mortgage Pass-Through Certificates, Series 2014-UBS3, Classes G and X-D issued by COMM 2014-UBS3 Mortgage Trust (the Trust) to Negative from Stable. In addition, DBRS confirmed the ratings on the following classes of the Trust:

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

Except for Classes G and X-D, the trend on all classes is Stable.

DBRS also discontinued the rating on Class A-1, as the class was fully repaid per the January 2019 remittance report.

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

The trend change on Classes G and X-D reflects the increased risk to the pool as two loans (Prospectus ID#19 – Cincinnati Multifamily Portfolio and Prospectus ID#39 – Radcliff Square Shopping Center), representing 1.8% of the pool balance, are in special servicing and are expected to result in realized losses to the Trust when each is ultimately resolved. While there is credit risk surrounding the specially serviced loans, the rating confirmations reflect the overall stability of the transaction.

According to the January 2019 remittance report, 48 of the original 49 loans remain in the pool with a Trust balance of $1,018 million, representing a 3.6% collateral reduction since issuance. Class A-1 was fully repaid as of the January 2019 remittance; therefore, DBRS discontinued its rating on the class.

As of January 2019 reporting, 99.5% of the pool balance reported YE2017 financials and 98.6% of the pool balance reported partial-year 2018 financials. According to these financials, the pool exhibited a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.50 times (x) and 9.1%, respectively, relatively in line with the DBRS Term DSCR and Debt Yield of 1.47x and 8.6%, respectively. The WA annualized partial-year 2018 DSCR for the top 15 non-defeased loans was 1.73x. The transaction benefits from defeasance collateral, as three loans, representing 3.3% of the pool balance, are fully defeased. Additionally, approximately 33.4% of the pool balance is secured by properties located in urban markets and the pool features a low retail-property-type concentration at 20.1% of the pool balance.

Four loans, representing 10.9% of the pool balance, are scheduled to mature in April and May 2019. Based on the preceding cash flows, the exit debt yields for the subject loans ranged from 6.0% to 15.5%. DBRS is monitoring one particular upcoming loan (Prospectus ID#5 – Sixty LES; 6.0% of the pool balance), which is secured by a 141-key boutique hotel in New York and is on the servicer’s watchlist due to continued weak financial performance.

Ten loans, representing 14.6% of the pool balance, are on the servicer’s watchlist. Seven of these loans (52.1% of the watchlist loan balance) were flagged due to deferred maintenance, while the remaining loans were flagged for performance issues. The Fairfield Inn & Suites by Marriott loan (Prospectus ID#35; 0.5% of the pool balance) in particular was added, as the borrower modified the franchise agreement without lender approval and due to stressed financial performance following an extensive renovation in 2017.

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 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:

-- Prospectus ID#1 – Bronx Terminal Market (10.3% of the pool balance)
-- Prospectus ID#5 – Sixty LES (6.0% of the pool balance; DBRS Hotlist)
-- Prospectus ID#19 – Cincinnati Multifamily Portfolio (1.3% of the pool balance)
-- Prospectus ID#35 – Fairfield Inn & Suites by Marriott (0.5% of the pool balance)
-- Prospectus ID#39 – Radcliff Square Shopping Center (0.5% of the pool balance)

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 commercial mortgage-backed security 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 Methodology, which can be found on www.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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

DBRS, Inc.
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