DBRS Morningstar Downgrades Five Classes and Discontinues One Class of COMM 2014-CCRE20 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) downgraded its ratings on five classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-CCRE20 (the Certificates) issued by COMM 2014-CCRE20 Commercial Mortgage Trust, as follows:

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

DBRS Morningstar confirmed its ratings on 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-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 X-C at BBB (sf)
-- Class D at BBB (low) (sf)

In addition, DBRS Morningstar discontinued its rating on Class X-F as it references a class with a C (sf) rating. All trends are Stable with the exception of Classes D, E, and X-D, which have Negative trends, and Classes F and G, which have ratings that do not carry a trend.

With this review, DBRS Morningstar removed Classes E, X-E, and X-F from Under Review with Negative Implications where they were placed on September 25, 2020. DBRS Morningstar also added the Interest in Arrears designation to Class E.

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 several of the specially serviced loans, particularly the Crowne Plaza Houston Katy Freeway and DoubleTree Beachwood loans. These loans showed significant performance declines prior to the onset of the Coronavirus Disease (COVID-19) global pandemic, although other loans in the pool have been more directly affected by the pandemic given the pool’s high concentration of hospitality and retail properties, totaling 61.4% of the pool, which have been hit particularly hard by the effects of the pandemic.

As of the February 2021 remittance, 57 of the original 64 loans remain in the pool, representing a collateral reduction of 15.8% since issuance. Twelve loans, representing 17.3% of the current pool balance, are fully defeased. On a positive note, there are only four loans, representing 4.0% of the current trust balance, on the servicer’s watchlist. The servicer is monitoring these loans for a variety of reasons, including low debt service coverage ratio (DSCR) and occupancy issues; however, the primary reason for the increase of loans on the watchlist is the coronavirus-driven stress for retail and hospitality properties, with watchlisted loans backed by those property types generally reporting a low DSCR.

Per the February 2021 remittance, eight loans are in special servicing, totaling 19.5% of the trust balance. Our primary concern is with Crowne Plaza Houston Katy Freeway (Pros ID#9; 3.0% of pool), which is secured by the borrower’s fee interest in a six-story, 207-key, full-service hotel in Houston, approximately five miles north of the Houston Galleria Mall. The loan transferred to special servicing in May 2020 for payment default after the property’s performance trended downward over the past few years, primarily a result of market factors associated with the downturn in the energy markets. The year-end 2019 NCF was down 58% since issuance and reported a DSCR of 0.59x. According to the servicer commentary, the lender is working with the borrower to transition the property via deed in lieu. The property was reappraised in June 2020 at $25.9 million, 47% below its issuance appraised value, resulting in a current LTV of 114.6%. DBRS Morningstar liquidated this loan as part of this analysis and assumed a loss to the trust.

DoubleTree Beachwood (Pros ID#12; 2.5% of pool), the pool’s only REO loan, is backed by a 404-key full-service hotel in Beachwood, Ohio, 12 miles east of Cleveland. The property’s performance has deteriorated in recent years as a result of increased competition from two nearby hotels that recently underwent renovations as well as from one new hotel in the area. The DoubleTree Beachwood has invested very little in renovations since its flag conversion in 2013. An updated appraisal completed in April 2020 valued the property at $9.7 million, which implies an LTV of 251%. The value reflects a decrease of 76% from the at-issuance appraisal value of $40 million. DBRS Morningstar assumed a nearly total loss as part of this analysis.

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, 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 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#4 – Harwood Center (5.7% of pool),
-- Prospectus ID#9 – Crowne Plaza Houston Katy Freeway (3.0% 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.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277