DBRS Morningstar Changes Trends on Two Classes of COMM 2014-CCRE15 Mortgage Trust to Negative From Stable, Confirms Ratings on All Classes

DBRS, Inc. (DBRS Morningstar) confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2014-CCRE15 issued by COMM 2014-CCRE15 Mortgage Trust as follows:

-- Class A-2 at AAA (sf)
-- 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 C at A (sf)
-- Class PEZ at A (sf)
-- Class X-B at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BB (high) (sf)
-- Class F at B (sf)

The trends on all classes are Stable with the exception of Classes E and F, for which trends have been changed to Negative from Stable.

The rating confirmations reflect the overall stable performance of the transaction; however, DBRS Morningstar changed the trends on Classes E and F to Negative as a result of ongoing performance issues with select loans, specifically those secured by hotel and retail properties, which have been disproportionately affected by the ongoing Coronavirus Disease (COVID-19) pandemic. Combined, these loans represent 11.4% of the outstanding transaction balance. As of the November 2020 reporting, there are five loans in special servicing, representing 8.8% of the current pool balance, and seven loans on the servicer’s watchlist, representing 14.7% of the current pool balance. Four of the five loans in special servicing are at least 90 days delinquent, and three of the four loans are secured by hotel and retail properties.

As of November 2020, the transaction consists of 34 loans totaling $715.0 million, as 15 of the original 49 loans have been repaid, resulting in collateral reduction of 29.1% including loan amortization. The transaction benefits from a concentration of office collateral, as six loans, representing 40.4% of the pool, are secured by office properties, which have shown greater resiliency to cash flow declines during the pandemic. This includes the largest loan in the transaction, which is secured by two office buildings in Sunnyvale, California (Prospectus ID #1, Google and Amazon Office Portfolio; 14.8% of the pool). The transaction also includes 12 loans secured by multifamily and MHC properties, representing 27.9% of the pool balance. Additionally, six loans, representing 9.9% of the pool, are secured by defeasance collateral.

The largest loan in special servicing, Spanish Oaks Apartments (Prospectus ID#11; 3.4% of the pool), is secured by a Class C, 824-unit multifamily property in Indianapolis. The loan transferred to special servicing in July 2020 after the borrower requested relief due to cash flow shortfalls caused by the coronavirus pandemic. The loan is paid through July 2020 and is over 90 days delinquent. The property had shown signs of performance weakness prior to the onset of the pandemic, as the YE2018 DSCR was 0.95x and the YE2019 DSCR was 1.10x. These trends have been exacerbated in 2020 with a high number of delinquent tenants listed in a September 2020 rent roll provided by the servicer. The property had an appraised value of $37.0 million ($44,900/unit) at issuance; however, given the current performance, the market value has likely fallen much closer to the outstanding loan balance of $24.3 million ($29,400)/unit. In the analysis for this review, a probability of default penalty was applied to increase the expected loss for this loan.

The second-largest loan in special servicing, River Falls Shopping Center (Prospectus ID #15, 2.2% of the pool), is secured by an anchored retail center in Clarksville, Indiana, approximately five miles north of Louisville, Kentucky. The loan transferred to special servicing in July 2020 after the borrower requested relief because of cash flow shortfalls caused by the pandemic. The loan is currently paid through July 2020 and is over 90 days delinquent. The property is anchored by a noncollateral Bass Pro Shops store and is currently 83.0% leased after a former Gordman’s closed with remaining tenants including Old Time Pottery (30.6% of NRA; expiring October 2026), Dick’s Sporting Goods (Dick’s) (17.7% of NRA; expiring January 2021), and Gabriel Brothers (12.0% of NRA; expiring January 2028). At issuance, the property was valued at $24.0 million, equating to a current loan to value ratio of 66.9%. The value has likely decreased as a result of ongoing headwinds faced by traditional retail properties in addition to the complications caused by the pandemic. In its analysis, DBRS Morningstar liquidated the loan from the pool assuming a haircut to the initial value, which resulted in a projected loss severity on the loan in excess of 30.0%.

Additional DBRS Morningstar commentary for these loans is available in the DBRS Viewpoint platform, for which information has been provided below.

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 and X-B 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 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#11 – Spanish Oaks Apartments (3.4% of the pool)
-- Prospectus ID#15 – River Falls Shopping Center (2.2% of the pool)
-- Prospectus ID#22 – Hilton Garden Inn Springfield OR (1.8% of the pool)
-- Prospectus ID#32 – Wyndham Hotel Oklahoma City Airport (1.0% 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 (March 6, 2020), 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

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