DBRS Morningstar Downgrades Three Classes of COMM 2014-CCRE18 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) downgraded three classes of Commercial Mortgage Pass-Through Certificates, Series 2014-C18 issued by COMM 2014-CCRE18 Mortgage Trust as follows:

-- Class E to B (high) (sf) from BB (low) (sf)
-- Class X-C to B (low) (sf) from B (sf)
-- Class F to CCC (sf) from B (low) (sf)

DBRS Morningstar also confirmed the ratings on the following classes:

-- Class A-4 at AAA (sf)
-- Class A-5 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 (low) (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class X-B at BBB (sf)
-- Class D at BBB (low) (sf)

In addition, DBRS Morningstar changed the trend on Class E to Negative from Stable. The rating on Class F no longer has a trend. Class X-C has a Negative trend. All other trends are Stable.

The rating downgrades and Negative trends reflect DBRS Morningstar’s outlook for the loans in special servicing and some of the loans on the servicer’s watchlist. There are three loans, representing 3.7% of the pool balance, in special servicing as of the March 2020 remittance. The largest specially serviced loan is 22 Exchange (Prospectus ID#17; 2.4% of the pool balance), which is secured by a student housing property in Akron, Ohio, and has been in special servicing since January 2018. The property has been real estate owned since December 2018, and a June 2019 appraisal reported a value of $12.0 million, down from the previous value obtained by the special servicer as of November 2018 of $15.0 million. At issuance, the appraised value was $28.4 million. Based on the most recent appraised value, DBRS Morningstar expects that a loss severity approaching 60.0% will be realized at resolution.

The second-largest specially serviced loan is Candlewood Suites Syracuse Airport (Prospectus ID#34; 0.9% of the current pool balance). The loan has been in special servicing since November 2018, and according to the October 2019 appraisal, the property was valued at $2.6 million, a significant decrease from the issuance value of $11.2 million. Based on the updated value, DBRS Morningstar believes a loss severity approaching 80.0% will be realized at liquidation.

The projected losses for these two loans results in a $9.3 million loss to the unrated Class G certificates, but the erosion in credit support for the Class E and Class F certificates supports the rating downgrades for those and the related interest-only (IO) certificate in Class X-C.

There are three loans, representing 8.1% of the pool balance, on the servicer’s watchlist, including two loans in the top 10. The fifth-largest loan in the pool, 399 Thornhall Street (Prospectus ID#8; 4.5% of the current pool balance), is on the servicer’s watchlist due to significant occupancy declines after the former largest tenant, Daiichi Sankyo, Inc., vacated at its October 2018 lease expiration. Where applicable, DBRS Morningstar assumed an elevated probability of default in the analysis for this review for watchlist and other loans exhibiting sustainable higher risks from issuance.

Updated loan-level commentary for the pivotal loans in the pool has been provided on the DBRS Viewpoint platform, for which information has been provided below.

The pool currently consists of 40 of the original 49 loans, representing a collateral reduction of 22.9% since issuance as of the March 2020 remittance. Loans representing 9.1% of the current pool balance are fully defeased. Loans representing 88.6% of the pool are reporting YE2018 financials, with a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.56 times (x) and 9.7%, respectively. The largest 15 loans represent 77.1% of the current pool balance, and the majority of the loans with most recent financials reported a WA DSCR and debt yield of 1.55x and 8.8%, respectively, representing a WA net cash flow growth of 6.0% over the DBRS Morningstar cash flow figures derived at issuance.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Classes X-A, X-B, and X-C are 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 Morningstar.

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

-- Prospectus ID#4–Southfield Town Center (27) (7.7% of the pool)
-- Prospectus ID#8–399 Thornhall Street (4.5% of the pool)
-- Prospectus ID#15–Meridian Corporate Center I & II (2.6% of the pool)
-- Prospectus ID#17–22 Exchange (2.4% of the pool)
-- Prospectus ID#34–Candlewood Suites Syracuse Airport (0.9% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding commercial mortgage-backed security 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 U.S. dollars unless otherwise noted.

The principal methodology is the North American CMBS Surveillance Methodology, which can be found on dbrsmorningstar.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 dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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.

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 Morningstar 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277