DBRS Morningstar Takes Rating Actions on COMM 2014-UBS3 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) downgraded two classes of Commercial Mortgage Pass-Through Certificates, Series 2014-UBS3 issued by COMM 2014-UBS3 Mortgage Trust (the Trust) as follows:

-- Class G to B (low) (sf) from B (sf)
-- Class X-D to B (sf) from B (high) (sf)

In addition, DBRS Morningstar confirmed its ratings on the remaining classes as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M 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)

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

DBRS Morningstar also changed the trend on the downgraded Classes G and X-D ratings to Stable from Negative. All remaining trends are Stable.

DBRS Morningstar previously assigned Negative trends to Classes G and X-D in February 2019 to reflect concerns surrounding two loans in special servicing, Radcliff Square Shopping Center (Prospectus ID#39) and Cincinnati Multifamily Portfolio (Prospectus ID#19). Those loans have since been resolved with liquidations in August 2019 and October 2019, respectively, cumulatively resulting in a $15.5 million loss to the Trust. Although realized losses were contained to the unrated Class H, the reduced credit support for Class G supports rating downgrades for that class and the related interest-only (IO) Class X-D. The remaining loans in the pool are generally performing as expected and no loans remain in special servicing as of the March 2020 remittance, which supports rating confirmations for the remaining classes in the Trust.

As of the March 2020 remittance, the pool consisted of 41 of the 49 original loans from issuance with collateral reduction of 17.8% since the transaction closed in 2014. Four loans, representing 4.3% of the current pool balance, are defeased. Loans representing 95.7% of the pool balance are reporting YE2019 or YE2018 financials with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.65 times (x) and 9.9%, respectively. The majority of the largest 15 loans, representing 80.3% of the pool balance, are reporting YE2019 or partial-year 2019 financials with a WA DSCR and debt yield 1.74x and 9.9%, respectively, representing a WA net cash flow (NCF) growth of 13.2% over the DBRS Morningstar NCF derived at issuance.

As of the March 2020 remittance, eight loans, representing 13.1% of the pool balance, are on the servicer’s watchlist, including three loans in the top 15. Two of the largest loans on the watchlist are secured by multifamily or retail properties with deferred maintenance cited at the most recent servicer’s site inspection. The largest loan on the servicer’s watchlist, Village Square and Deerpath Court (Prospectus ID #10; 3.5% of the pool), is secured by two retail properties in the Chicago metropolitan statistical area and the loan is being monitored for occupancy declines at the collateral properties since issuance. The servicer reports that new tenants have taken the bulk of the vacated spaces with a Q3 2019 DSCR and occupancy rate of 2.24x and 96.0%, respectively. DBRS Morningstar believes that the loan will be removed from the servicer’s watchlist in the near term.

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, X-C, and X-D 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 will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS.

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

-- Prospectus ID#4 – Southfield Town Center (8.8% 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 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 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.

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