DBRS Morningstar Places Three Classes of MCAP CMBS Issuer Corporation, Series 2014-1 Under Review with Negative Implications

DBRS Limited (DBRS Morningstar) placed three classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-1 (the Certificates) issued by MCAP CMBS Issuer Corporation, Series 2014-1 Under Review with Negative Implications as follows:

-- Class E at BBB (low), Under Review with Negative Implications
-- Class F at BB (sf), Under Review with Negative Implications
-- Class G at B (sf), Under Review with Negative Implications

There is no trend for these rating actions. With the last surveillance review, in March 2019, DBRS Morningstar maintained a Negative trend for Class G, reflecting our concerns surrounding the performance declines for two loans secured by office properties in Calgary, Alberta.

DBRS Morningstar has taken these most recent rating actions because of the concerns and uncertainty surrounding the 1121 Centre Street NW loan (Prospectus ID#7, 23.2% of the pool) amid recent developments with the loan sponsor, Strategic Group.

On December 11, 2019, Strategic Group, a Calgary, Alberta-based real estate investment firm, submitted an initial application filing under Canada’s Companies’ Creditors Arrangement Act (CCAA). The filing impacts entities affiliated with 50 commercial properties within the company’s 171-property portfolio, including the collateral property for the 1121 Centre Street NW loan in this pool.

Although historic performance for the subject property has been stable, recent developments suggest cash flows will decline in the coming year, as the former second-largest tenant, BGC Engineering Inc. (19.9% of the NRA), vacated the property in June 2018, decreasing occupancy to 68.0%. The office market in Calgary continues to exhibit prolonged vacancy rate spikes, reductions in rental rates, and an overall lack of liquidity. Updated occupancy and leasing information for the subject property has been requested from the servicer. For further information on this loan, please see the DBRS Viewpoint platform, for which information has been provided, below.

For further information on the filing and exposure across the DBRS Morningstar-rated book, please see the December 18, 2019, commentary titled “The Impact of Strategic Group’s Creditor Protection Filing on CMBS Loans” on the DBRS Morningstar website at www.dbrs.com.

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

DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform.

For complimentary access to this content, please register for an account at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in Canadian 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 Morningstar 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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada