DBRS Morningstar Downgrades Five Classes of COMM 2014-UBS6, Removes Six Classes from Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) downgraded five classes of Commercial Mortgage Pass-Through Certificates, Series 2014-UBS6 issued by COMM 2014-UBS6 Mortgage Trust as follows:

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

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

-- 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 A (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class G at C (sf)

Classes D, E, F, G, X-C, and X-D were removed from Under Review with Negative Implications, where they were placed on August 6, 2020. The trends for these classes are Negative. All other trends are Stable. The Negative trends and rating downgrades reflect the continued performance challenges for the underlying collateral, much of which has been driven by the impact of the Coronavirus Disease (COVID-19) global pandemic. In addition to loans representing 9.9% of the pool in special servicing as of the November 2020 remittance, DBRS Morningstar also notes the pool has a high concentration of retail and hospitality properties, representing 32.4% and 18.1% of the pool balance, respectively. These property types have been the most severely affected by the initial effects of the coronavirus pandemic and as such, those concentrations suggest increased risks for the pool, particularly at the lower rating categories, since issuance.

As of the November 2020 remittance, 79 of the original 89 loans remain in the pool, representing a collateral reduction of 14.0% since issuance. There are seven loans, representing 9.9% of the pool, in special servicing, including the fifth-largest loan, University Village (Prospectus ID# 5; 3.6% of the pool), which is 90-plus days delinquent. The $39 million loan is secured by a 456-unit (1,164-bed) student housing complex in Tuscaloosa, Alabama. The property, which is two miles from the University of Alabama, was built in 2009. The loan transferred to the special servicer in July 2019. The property’s net cash flow (NCF) has remained low for several years, with the 2018 NCF down 25% from issuance. The performance decline is due to a combination of factors including additions to supply, the subject being of an older vintage, and declining enrollment at the university. These trends are expected to continue as the property was 23% occupied as of August 2020 and was only 33% preleased for the 2020-21 school year according to the special servicer. In its analysis, DBRS Morningstar assumed a haircut to the March 2020 appraised value and liquidated the loan from the trust, resulting in a hypothetical loss severity in excess of 62.0%.

According to the November 2020 remittance, 21 loans are on the servicer’s watchlist, representing 40.1% of the current pool balance. These loans are being monitored for various reasons including low debt service coverage ratio (DSCR) or occupancy decreases, delinquency, tenant rollover risk, and/or pandemic-related forbearance requests. Four loans, representing 10.3% of the current pool balance, are fully defeased.

The W Scottsdale (Prospectus ID #2; 5.1% of the pool) is the only master-serviced loan that is delinquent. The loan is secured by a seven-story, 236-room, full-service boutique hotel in Scottsdale, Arizona. The loan was added to the servicer’s watchlist for delinquency concerns after the loan fell 60 days delinquent as of November 2020. The loan is expected to transfer to the special servicer in December with the borrower likely to request coronavirus-related relief. Despite its recent delinquency, the hotel has historically maintained strong performance as the YE2019 NCF was up 25% since issuance. The loan had a DSCR of 2.34x during that period. Given the loan’s recent delinquency, this loan was analyzed with an elevated probability of default for this review.

ESG CONSIDERATIONS
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 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#2 – W Scottsdale (5.1% of the pool)
-- Prospectus ID#5 – University Village (3.6% 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-inance-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 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 info@dbrsmorningstar.com.

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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