DBRS Morningstar Confirms Ratings of COMM 2014-CCRE15 Mortgage Trust, Maintains Negative Trends on Two Classes

DBRS, Inc. (DBRS Morningstar) confirmed its 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-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 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)

Classes E and F continue to carry Negative trends as a reflection of the potential for further declines in the outlook for the loans in the pool in special servicing and on the servicer’s watchlist, as further discussed below. The trends on all other classes are Stable.

At issuance, the transaction consisted of 49 loans secured by 64 commercial and multifamily properties, with an aggregate trust balance of $1.0 billion. As of the September 2021 remittance, 33 loans remain in the pool including six loans (11.1% of the pool) that have fully defeased. The current pool balance of $621.9 million represents a collateral reduction of 38.3% from issuance. To date, two loans have been liquidated from the pool resulting in a realized loss to the trust of $13.5 million, which has been contained to the nonrated Class G certificates. The transaction has benefited from its concentration of office collateral, as five loans, representing 42.4% of the current pool (or six loans representing 56.0% of the pool when the 625 Madison Avenue loan (Prospectus ID #3, 13.6% of the pool), which is backed by the leased fee, is included) are secured by office properties, which have so far shown greater resiliency to cash flow declines during the course of the Coronavirus Disease (COVID-19) 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; 16.8% of the pool). The transaction also includes eight loans secured by multifamily and MHC properties, representing a combined 12.3% of the pool balance.

As of the September 2021 reporting, there are four loans in special servicing, representing 9.3% of the current pool balance, including one that is real estate owned, the Wyndham Hotel Oklahoma City Airport (Prospectus ID#32, 1.1% of the current pool balance). Additionally, there are seven loans, representing 12.5% of the current pool balance, being monitored on the servicer’s watchlist. The watchlisted loans are being monitored for various reasons including low debt service coverage ratios (DSCRs), servicer trigger events, occupancy declines and/or lease rollover, granted coronavirus-related relief requests, and failure to submit financials. Three of the watchlisted loans, representing 6.2% of the current pool balance, are secured by limited-service hotel properties.

The largest loan in special servicing remains the Spanish Oaks Apartments loan (Prospectus ID#11; 3.4% of the pool), which is secured by a Class C, 824-unit multifamily property in Indianapolis. The loan transferred to special servicing in July 2020 and the special servicer’s September 2021 commentary indicates negotiations for a relief agreement remain ongoing. The loan is paid through September 2021 but has been flagged as delinquent at least four times in the past 12 months. The loan has never been more than 60 days delinquent, which would trigger an updated appraisal. While updated financials have not been provided since the onset of the pandemic, cash flow was down even before the pandemic, with a year-end (YE) 2018 DSCR of 0.95 times (x) and a YE2019 DSCR of 1.10x. These trends were exacerbated in 2020 with a high number of delinquent tenants listed in a September 2020 rent roll provided by the servicer.

In addition to the cash flow declines, the property’s condition is an issue as well, as the servicer’s September 2020 site inspection found the property in general disrepair and identified at least 11 down units, eight of which were the result of multiple fires. At issuance, the property had an appraised value of $37.0 million ($44,900/unit); however, given the current performance and condition issues, the market value has likely fallen much closer to the outstanding loan balance of $23.8 million ($28,800/unit). In the analysis for this review, DBRS Morningstar liquidated the loan from the pool using a stressed value figure based on the in-place cash flow at YE2019 and a stressed cap rate, which resulted in a loss severity on the loan of 15.2%.

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 September 2021 reporting shows the loan 30-59 days delinquent, paid through July 2021. The servicer’s September 2021 commentary notes the borrower’s coronavirus-relief request has been approved and is pending documentation.

The property is anchored by a noncollateral Bass Pro Shops Outdoor World and is currently 83.0% leased. The in-place occupancy rate fell after the loss of Gordmans, 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). Other tenant losses for the larger property since issuance include a noncollateral Toys “R” Us and a noncollateral Regal Cinemas. The servicer has advised the Dick’s lease was extended, but terms have not been provided. At issuance, the property was valued at $24.0 million, equating to a current loan-to-value ratio of 65.6%. The value has likely decreased, however, given the occupancy losses for both the collateral and noncollateral portions of the property and, as such, DBRS Morningstar liquidated the loan from the pool assuming a significant haircut to the issuance value, which resulted in a projected loss severity on the loan in excess of 50.0%.

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.

DBRS Morningstar materially deviated from its North American CMBS Insight Model when determining the rating assigned to Class C as the quantitative results suggested higher ratings on that class. The material deviation is warranted given the uncertain loan-level event risk with the loans in special servicing and on the servicer’s watchlist.

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.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

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 26, 2021), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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 [email protected].

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