DBRS Morningstar Downgrades Five Classes of COMM 2014-LC17 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) downgraded five classes of Commercial Mortgage Pass-Through Certificates, Series 2014-LC17 issued by COMM 2014-LC17 Mortgage Trust (the Trust) as follows:

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

In addition, DBRS Morningstar confirmed its ratings on the classes listed below:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 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 AA (low) (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)

DBRS Morningstar maintained Negative trends on Classes E, X-D, and X-E, while Classes F and G are assigned ratings that do not carry trends. All other trends are Stable.

Furthermore, the rating on the notional Class X-F was discontinued and withdrawn by DBRS Morningstar as the Applicable Referenced Obligation, Class G, was downgraded to C (sf) which was due to the projected losses upon the resolution of the specially serviced loans in addition to decreased credit support as the Trust experienced a $19.3 million loss contained to the nonrated Class H.

As of the March 2020 remittance, there were six specially serviced loans, representing 9.6% of the current pool balance, including World Houston Plaza (Prospectus ID #20, 1.8% of the pool), which is secured by a suburban Class B office property in Houston, located approximately 17 miles north of the central business district and south of the George Bush Intercontinental Airport. The loan transferred to special servicing in June 2017 after losing a major tenant, Weatherford US, which occupied 50.5% of the net rentable area. The loan has been real estate owned since January 2018. According to the January 2019 appraisal, the property was valued at $9.0 million, a decline from the issuance value of $27.0 million. Based on the updated value, DBRS Morningstar assumed a loss severity approaching 70.0% with this review.

The 50 Crosby Drive loan (Prospectus ID#7, 3.5% of the pool balance) recently transferred to special servicing in February 2020 for imminent default. The collateral is an office property in Bedford, Massachusetts, and its single tenant, Acme Packet, Inc, a subsidiary of Oracle America, Inc, exercised its early termination option and vacated in March 2020. The tenant paid a $2.0 million termination fee. For additional information on this and the other pivotal specially serviced loans, please see the DBRS Viewpoint platform, for which information is provided below.

As of the March 2020 remittance, the pool consists of 60 of the original 71, loans with collateral reduction of 24.3% since issuance. Seven loans are defeased, representing 7.2% of the current pool balance. Loans representing 92.7% of the pool are reporting YE2019 or YE2018 financials, with a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.89 times (x) and 11.5%, respectively. The top 15 loans represent 61.1% of the current pool balance and majority of the loans reporting YE2019 or partial-year 2019 financials, with a WA DSCR and debt yield of 2.05x and 12.2%, respectively, representing a WA net cash flow growth of 19.9% over the DBRS Morningstar cash flow figures derived at issuance. As of the March 2020 remittance, there are 10 loans, representing 7.7% of the pool balance, on the servicer’s watchlist; none of the watchlisted loans are in the top 15 loans in the pool.

DBRS Morningstar does note the subject transaction has a sizable concentration of hotel properties in the top 10, including the largest loan in the pool, Loews Miami Beach Hotel (Prospectus ID#1, 12.9% of the pool balance); Myrtle Beach Marriott Resort & Spa (Prospectus ID#4, 5.3% of the pool balance); and Aloft Cupertino (Prospectus ID#6, 3.5% of the pool balance). Although performance has generally been improved for all three since issuance, the recent events of the Coronavirus Disease (COVID-19) pandemic have meant leisure and business travel in the United States and around the world has ground to a halt, with hotel operators reporting sharp revenue per available room declines for the affected March 2020 weeks and projections for sustained declines for months to come. As these events unfold, DBRS Morningstar will continue to monitor closely for developments.

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, X-D, and X-E 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 will be subject to ongoing 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#7–50 Crosby Drive (3.5% of the pool)
-- Prospectus ID#20–World Houston Plaza (1.8% of the pool)
-- Prospectus ID#29–1401/1405/1621 Holdings (1.3% of the pool)
-- Prospectus ID#3 –Georgia Multifamily Portfolio (1.1% 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 North American CMBS Surveillance Methodology, which can be found on www.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 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.

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/dbrs-morningstar-provides-update-on-rating-methodologies-in-light-of-measures-to-contain-coronavirus-disease-covid-19.

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