DBRS Morningstar Downgrades Six Classes of WFRBS Commercial Mortgage Trust 2014-C21; Removes Four Classes From UR-Neg.

DBRS, Inc. (DBRS Morningstar) downgraded the ratings on six classes of Commercial Mortgage Pass-Through Certificates, Series 2014-C21 issued by WFRBS Commercial Mortgage Trust 2014-C21 as follows:

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

DBRS Morningstar also confirmed the ratings on 10 classes as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-SBFL at AAA (sf)
-- Class A-SBFX at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)

As part of its review, DBRS Morningstar removed Classes E, F, X-C, and X-D from Under Review with Negative Implications where it had placed them on August 6, 2020. The trends on Classes X-B, D, X-C, E, and X-D are Negative. Class F no longer carries a trend, given its CCC (sf) rating, and DBRS Morningstar designated this class as having Interest in Arrears. The trends on all remaining classes are Stable.

The downgrades and Negative trends generally reflect the overall weakened performance of the collateral since the last review and the increased likelihood of losses to the trust upon the resolution of the specially serviced loans. At issuance, the trust consisted of 121 loans secured by 145 commercial and multifamily properties with a trust balance of $1.42 billion. Per the February 2021 remittance, 109 loans remain in the trust, secured by 133 commercial properties, with a trust balance of $1.16 billion, which represents a collateral reduction of 18.2% from loan payoffs, amortization, and the liquidation of a single loan in 2019 that resulted in a small loss to the unrated Class G. The pool is relatively granular by loan size as the largest 15 loans comprise 56.2% of the trust balance and the largest loan only represents 7.7% of the trust balance. Seventeen loans, totaling 8.3% of the trust balance, are fully defeased. The trust is concentrated by property type as 14 loans, representing 30.3% of the trust balance, are secured by office properties, which have generally been stable performers thus far during the Coronavirus Disease (COVID-19) pandemic.

Per the February 2021 remittance, six loans are in special servicing, totaling 12.0% of the trust balance. Four of the loans transferred to the special servicer during the coronavirus pandemic and two of the higher risk specially serviced loans are secured by Class B/C regional malls that had demonstrated financial weakness prior to the pandemic. Montgomery Mall (Prospectus ID#9; 4.0% of the trust balance) is a regional mall in North Wales, Pennsylvania, approximately 22 miles north of Philadelphia, that is owned and operated by Simon Property Group. The mall is anchored by a JCPenney, DICK’s Sporting Goods, Macy’s, and Wegmans Food Market; however, the mall lost the noncollateral anchor Sears in February 2020. Per the September 2020 rent roll, the mall’s occupancy rate has declined considerably since issuance to 74.2% from 92.4%. The mall’s anchors present additional risk since issuance with JCPenney and Macy’s publicly announcing in recent years their plans for additional store closures throughout the country. While the loan reported a sufficient debt service coverage ratio (DSCR) of 1.98 times (x) for YE2019, the property’s net cash flow (NCF) significantly declined to $9.2 million in 2019, well below the issuer’s underwritten NCF of $14.2 million at issuance. The servicer had previously noted that the sponsor was unwilling to inject additional capital into the collateral; however, the special servicer continues to discuss possible loan modification solutions as of February 2021. The collateral was reappraised in August 2020 for a value of $61.0 million, down 61.7% from the $195.0 million appraised value at issuance. DBRS Morningstar liquidated the loan from the trust as part of the subject analysis, which resulted in an implied loss severity in excess of 50.0%.

Oak Court Mall (Prospectus ID#15;1.8% of the trust balance) is secured by the in-line portion and a 50,000 square foot (sf) anchor box of a regional mall in Memphis, Tennessee. The mall is owned and operated by Washington Prime Group and is anchored by noncollateral anchors Macy’s and Dillard’s Women. The loan transferred to the special servicer in May 2020 due to imminent monetary default and forbearance relief was requested. As of January 2021, the special servicer and borrower agreed to a preliminary loan modification that would include the extension of the loan term (the loan is currently scheduled to mature in April 2021), deferment of debt service payments, and the implementation of a hard cash management. The collateral’s performance had been steadily deteriorating prior to the coronavirus pandemic with a YE2019 DSCR of 1.21x, compared with the YE2018 DSCR of 1.45x and YE2017 DSCR of 1.86x. The June 2020 rent roll showed the mall was 98.3% occupied and the largest three collateral tenants included Dillard’s Men’s (20.8% of collateral net rentable area (NRA)), H&M (2.7% of collateral NRA), and New Square (1.0% of collateral NRA). Dillard’s Men’s subsequently vacated its 50,000-sf suite in January 2021. The collateral’s occupancy rate is projected to decrease to approximately 77.5% as a result. The collateral was reappraised in July 2020 for a value of $15.0 million, down 75.4% from the $61.0 million appraised value at issuance. DBRS Morningstar liquidated the loan from the trust as part of the subject analysis, resulting in an implied loss severity in excess of 70.0%.

DBRS Morningstar is also monitoring The Bluffs loan (Prospectus ID#10; 2.2% of the trust balance) as the special servicer is expected to take the property’s title in early 2021. The loan is secured by a 544-unit Class A multifamily property in Junction City, Kansas, that primarily caters to soldiers and related staff stationed at nearby Fort Riley. The property was reappraised in September 2020 at a value of $27.3 million, down 43.5% of the $48.3 million appraised value at issuance. It should be noted that two large fires occurred during the loan term that destroyed 58 units and the borrower elected to use insurance proceeds to pay down the subject mortgage debt rather than reconstruct the units. The updated appraised value results in an implied loan-to-value ratio of 94.1% and the appraiser noted some additional upside for the property in the near term. The loan was liquidated from the trust as part of the subject review, resulting in an implied loss severity in excess of 15.0%.

The trust also has 28 loans, representing 35.9% of the trust balance, on the servicer’s watchlist. Most of the loans on the servicer’s watchlist reported low DSCRs and were placed there during the coronavirus pandemic. This includes the largest loan in the trust, Fairview Park Drive (Prospectus ID#1; 7.7% of the trust balance), although the property recently secured a new long-term anchor tenant, BAE Systems, with a lease expiration date well past the loan term.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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#1 – Fairview Park Drive (7.7% of the pool)
-- Prospectus ID#8 – Tryp by Wyndham Times Square South (3.6% of the pool)
-- Prospectus ID#9 – Montgomery Mall (4.0% of the pool)
-- Prospectus ID#10 – The Bluffs (2.2% of the pool)
-- Prospectus ID#15 – Oak Court Mall (1.8% 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 (March 6, 2020), which can be found at dbrsmorningstar.com/about/methodologies. A link to the methodology referenced in this transaction is listed at the end of this press release. 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.

This rating was disclosed to the master servicer and trustee, as representatives of the issuer, through the 17g-5 information provider, master servicer directly, and/or the depositor and amended following that disclosure before being assigned.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on this transaction took place on March 13, 2020, when all classes were confirmed with Stable trends.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: Joe Shmigelsky, Assistant Vice President, Credit Ratings
Rating Committee Chair: Richard Carlson, Senior Vice President, Credit Ratings
Initial Rating Date: July 14, 2014

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

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 696-6293

North American CMBS Surveillance Methodology – March 6, 2020
https://www.dbrsmorningstar.com/research/357710/north-american-cmbs-surveillance-methodology

North American CMBS Insight Model v 1.0.2.0

DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings – February 3, 2021
https://www.dbrsmorningstar.com/research/373262