DBRS Upgrades All Classes of LSTAR Commercial Mortgage Trust 2014-2

DBRS Limited (DBRS) upgraded the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-2 issued by LSTAR Commercial Mortgage Trust 2014-2:

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

All trends are Stable.

The rating upgrades reflect the transaction’s overall healthy performance, including significant collateral reduction since issuance. At issuance, the transaction consisted of 208 loans, including 203 seasoned loans purchased by the issuer from Fannie Mae, two 2006 small balance transactions and five newly originated loans. According to the July 2019 remittance, the trust has a current balance of $40.4 million, representing a collateral reduction of approximately 85.6% due to the repayment of 127 loans (including the five newly originated loans), scheduled loan amortization and principal curtailments. Based on the most recent net cash flow (NCF) reporting, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.05 times (x) and 9.5%, respectively. There has been WA NCF growth of approximately 14.7% over DBRS NCF figures. The Top 15 loans (43.9% of the pool) reported a 4.2% increase in NCF over the DBRS NCF figures from issuance and a WA debt yield of 10.5%. The WA remaining term to maturity for the pool is 16.5 years, while the top 15 loans have a WA outstanding remaining term of 17.0 years.

According to the July 2019 remittance, there are two loans (1.1% of the pool) in special servicing and four loans (7.6% of the pool) on the servicer’s watchlist. The Berkley Apartments loan (Prospectus ID#185, 0.5% of the pool) was transferred to the special servicer in May 2017; DBRS analyzed this loan under a hypothetical liquidation scenario at an estimated loss severity just under 50.0%. The 59 Samsonville Road loan (Prospectus ID#186, 0.5% of the pool) was transferred to the special servicer in May 2017; DBRS analyzed this loan based on issuance analysis results. The largest loan at issuance, 399 Jefferson (Prospectus ID#1, previously 44.5% of the pool) repaid from the trust with the June 2019 remittance. With the repayment from the trust, the loan sustained a loss of $518,430.

DBRS materially deviated from its “North American CMBS Surveillance Methodology” when determining the ratings assigned to Class F and Class G, which deviated from the higher ratings implied by the quantitative results. DBRS considers a material deviation from a methodology to exist when there may be a substantial likelihood that a reasonable investor or other user of the credit ratings would consider the material deviation to be a significant factor in evaluating the ratings. The material deviations are warranted given uncertain loan level event risk.

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

Notes:
All figures are in U.S dollars unless otherwise noted.

The principal methodology is the 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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