DBRS Morningstar Downgrades Two Classes of COMM 2014-LC15 Mortgage Trust

DBRS Limited (DBRS Morningstar) downgraded the ratings on two classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-LC15 issued by COMM 2014-LC15 Mortgage Trust as follows:

-- Class X-C to B (low) (sf) from B (sf)
-- Class F to CCC (sf) from B (low) (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-M at AAA (sf)
-- Class A-SB 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 BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at B (sf)

DBRS Morningstar removed Classes E, X-C, and F from Under Review with Negative Implications, where they were placed on August 6, 2020. Class E has a Negative trend because of the increase in risks associated with the specially serviced loans. Class F does not carry a trend. All other trends are Stable.

As of the February 2021 remittance, the pool balance had been reduced to $714.2 million from $927.5 million at issuance, a collateral reduction of 16.7% resulting from amortization, the payoff of six loans, and the liquidation of two loans from the trust. The pool is fairly concentrated by property type as loans representing 37.2% of the pool are secured by retail properties. In addition, three loans (2.3% of the pool balance) are fully defeased.

The Negative trend on Class E and downgrades to Classes X-C and F reflect DBRS Morningstar’s concerns for the six loans, representing 12.2% of the pool, in special servicing. The largest loan in special servicing, Marriott Downtown Hartford (Prospectus ID#8, 5.7% of the pool), is secured by a 409-key full-service hotel in Hartford, Connecticut, and transferred to special servicing in July 2020 for payment default. The loan struggled throughout 2020 and reported a negative cash flow because of its reliance on the Connecticut Convention Center which is connected to the collateral. The Coronavirus Disease (COVID-19) pandemic has severely affected group and meeting bookings, and the loan is currently 90 days to 120 days delinquent. The special servicer and borrower are currently negotiating potential debt relief options.

The second-largest loan in special servicing is Hilton Garden Inn Houston (Prospectus ID#14, 2.6% of the pool). This loan, secured by a 171-key hotel in Houston, transferred to special servicing in December 2019 for payment default. In addition to disruptions arising from the pandemic, the hotel has been negatively affected by fluctuations in the oil industry. The YE2019 debt service coverage ratio (DSCR) was reported at only 0.21 times (x) and, through Q3 2020, the loan’s cash flow turned negative. The borrower has expressed interest in conveying title back to the lender. An updated appraisal as of September 2020 valued the property at $12.5 million, a 60% decline from the issuance value of $31.6 million. For this review, DBRS Morningstar liquidated the loan from the trust which resulted in an implied loss severity in excess of 50%.

DBRS Morningstar remains concerned with the McKinley Mall loan (Prospectus ID#22, 1.2% of the pool) which has been in special servicing since April 2018. This loan is secured by a regional mall in Buffalo that has lost all but one of its anchor tenants to bankruptcy closures. Through Q3 2020, the collateral was 64.7% occupied with an annualized DSCR of 0.02x. Servicer commentary notes that a receiver is now in control and the borrower is co-operating with an orderly turnover of the mall. An updated appraisal as of November 2020 valued the property at $11.5 million, a 79.6% decline from the issuance value of $56.6 million. For this review, DBRS Morningstar liquidated the loan from the trust which resulted in an implied loss severity in excess of 85%.

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, and X-C 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#8 – Marriott Downtown Hartford (5.7% 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 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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