DBRS Upgrades Eight Classes and Confirms Six Classes of Citigroup Commercial Mortgage Trust 2014-GC19

DBRS Limited (DBRS) upgraded the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2014-GC19 issued by Citigroup Commercial Mortgage Trust 2014-GC19 as follows:

-- Class B to AAA (sf) from AA (high) (sf)
-- Class C to AA (sf) from AA (low) (sf)
-- Class PEZ to AA (sf) from AA (low) (sf)
-- Class D to BBB (high) (sf) from BBB (sf)
-- Class X-C to BBB (sf) from BBB (low) (sf)
-- Class E to BBB (low) (sf) from BB (high) (sf)
-- Class X-D to BB (high) sf) from BB (sf)
-- Class F to BB (sf) from BB (low) (sf)

DBRS also confirmed the ratings on six classes as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)

All trends are Stable.

The rating upgrades reflect the increased credit support to the bonds as a result of successful loan repayment and scheduled loan amortization since issuance. Per the January 2019 remittance, 70 of the original 84 loans remain in the pool with an aggregate trust balance of approximately $754.4 million, representing a collateral reduction of 25.8% since issuance. In addition, there are currently nine loans (6.1% of the pool) secured by collateral that is fully defeased. To date, non-defeased loans representing approximately 96.7% of the pool have reported YE2017 financials. Based on the most recent year-end reporting, the non-defeased loans in the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.56 times (x) and 10.4%, respectively, compared to the DBRS Term DSCR figure and DBRS debt yield figures of 1.25x and 7.9%, respectively, at issuance. Based on the same reporting, the top 15 loans (41.7% of the pool) reported a WA DSCR of 1.68x compared with the WA DBRS Term DSCR of 1.38x, reflecting a 28.1% net cash flow (NCF) growth over the DBRS issuance figure.

Of the loans in the top 15, two of them (3.2% of the pool) are being monitored due to uncertainty with their grocery anchored tenants. The largest of these loans, Mid-City Plaza (Prospectus ID#13; 1.8% of the pool), is anchored by a Tops Friendly Markets (Tops; 26.6% of net rentable area (NRA), through July 2024), which filed for Chapter 11 bankruptcy in September 2018, but has since had a court approved debt restructuring in November 2018. As part of the restructuring, Tops closed ten underperforming stores and amended other locations’ leases with reduced rental payments. The loan is secured by a 218,145-square foot (sf) grocery anchored retail center, located in North Tonawanda, about ten miles north of Buffalo. As of Q3 2018, the loan reported an annualized amortizing DSCR of 1.62x, compared with 1.69x at YE2017 and 1.34x at YE2016. DBRS has asked the servicer if the subject Tops has had any amendments to their lease. The second loan, Anthem Marketplace (Prospectus ID#17; 1.5% of the pool), is anchored by a Safeway, Inc. (Safeway; 48.7% of NRA), with a near term lease expiration in May 2020. Safeway does have renewal options available, but to date, it has not been confirmed if the tenant will elect to renew. At issuance, Safeway reported a low trailing 12-month sales figure of $255 per square foot. The collateral is secured by a 113,292-sf grocery anchored retail plaza, located in Anthem, Arizona, 30 miles northwest of Phoenix. DBRS is now monitoring the loan on DBRS Hotlist given the upcoming lease expiration and has requested an updated sales figure as well as a leasing update on the preliminary renewal discussions.

As of the January 2019 remittance, there are seven loans (7.8% of the pool) on the servicer’s watchlist, with no loans in special servicing. Of the seven loans on the servicer’s watchlist, four of them (2.9% of the pool) were flagged for performance-related reasons. Based on the most recent partial year financials, these loans had a WA DSCR of 0.99x, compared to the WA DBRS Term figure of 1.26x, reflecting a 3.5% NCF decline over the DBRS issuance figure. The most noteworthy of these loans, 334-336 West 46th Street (Prospectus ID#35; 0.8% of the pool), was flagged for a low DSCR as a result of fluctuating occupancy. The collateral is secured by a mixed-use property located in New York City that is comprised of both apartment units and a retail portion. Despite the recent improvement in occupancy to 89% in September 2018, from 59% in December 2016, financial performance remains poor, as the loan reported an annualized amortizing DSCR of 0.70x as of Q3 2018. In addition to poor financial performance, the borrower has historically been delinquent and is often late on debt service payments.

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#13 – Mid-City Plaza (1.8% of the pool)
-- Prospectus ID#17 – Anthem Marketplace (1.5% of the pool) (DBRS Hotlist)
-- Prospectus ID#35 – 334-336 West 46th Street (0.8% 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 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 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. 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.

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