DBRS Morningstar Confirms All Ratings on COMM 2014-CCRE14 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-CCRE14 issued by COMM 2014-CCRE14 Mortgage Trust as follows:

-- Class A-2 at AAA (sf)
-- 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 (low) (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class D at BB (high) (sf)
-- Class E at B (low) (sf)
-- Class F at CCC (sf)

All trends are Stable with the exception of Class F, which does not carry a trend.

The rating confirmations and Stable trends reflect the overall stable performance of the transaction. Per the September 2021 remittance, 43 of the original 60 loans remain in the transaction, with a trust balance of $986.3 million, representing a collateral reduction of 28.4% since issuance as a result of loan repayments, scheduled amortization, and proceeds from liquidated loans. In August 2021, the McKinley Mall (2.0% of the issuance trust) incurred a realized loss of $19.7 million (loss severity of 81.4%), slightly less than DBRS Morningstar’s projection of $20.8 million (loss severity of 85.9%). In total, five loans have been liquidated from the trust, resulting in a $31.1 million writedown to the nonrated Class G.

The transaction has a high concentration of office collateral, as 11 loans, representing 47.4% of the pool, are secured by office properties, which have shown greater resiliency to cash flow declines during the Coronavirus Disease (COVID-19) pandemic, although the full impact on the office segment remains to be seen as companies begin to have their employees return to offices. This office concentration includes the pool’s three-largest loans, comprising a telecommunications data centre in lower Manhattan in New York (60 Hudson Street; Prospectus ID#2, 15.7% of the pool), Google and Amazon Office Portfolio (Prospectus ID#1, 14.9% of the pool balance), and the fee interest in the land underneath 625 Madison Avenue (Prospectus ID#3, 11.1% of the pool balance). Additionally, nine loans, representing 13.0% of the pool, are defeased.

According to the September 2021 remittance, 11 loans, representing 30.4% of the pool, are currently on the servicer’s watchlist. These loans are being monitored for various reasons, including low debt service coverage ratios (DSCR) or occupancy, tenant rollover risk, and/or pandemic-related forbearance requests. Five of these loans, representing 7.2% of the pool, are secured by hotel assets that have all received pandemic-related forbearances.

Two loans, representing 1.8% of the pool, are in special servicing. These two loans, Hampton Inn Cranberry Township Pittsburgh (Prospectus ID#35, 0.9% of the pool) and Hampton Inn Pittsburgh Greentree (Prospectus ID#36, 0.9% of the pool), are both secured by limited-service hotels in Pittsburgh. The loans, which share related borrower entities, transferred to special servicing in the last 12 months for imminent monetary default related to pandemic, with workout discussions listed as ongoing. Both loans had seen significant drops in net cash flow prior to the pandemic, primarily from a glut of new supply in the market. DBRS Morningstar increased the probability of default (PoD) for these loans.

The third-largest loan on the servicer’s watchlist, 175 West Jackson (Prospectus ID#8, 3.8% of the pool), is secured by a 22-storey, 1.54 million-square-foot (sf) office tower in the Chicago central business district. The loan has severely underperformed since issuance and transferred to the special servicer in 2018 because of a below-breakeven DSCR. The loan transferred back to the master servicer in September 2018 after Brookfield Asset Management (Brookfield) acquired the property for $305 million ($218/sf) in 2018, or 26% lower than the at-issuance appraised value. Occupancy minimally improved to 63% as of March 2021 from 61% as of YE2018. According to the servicer, the sponsor had a lot of leasing activity planned in 2020, but given the fallout from the pandemic, there has been very little leasing in the Central Loop submarket, which reported a vacancy rate of 15.4% as of Q3 2021. As of Q1 2021, the loan reported an annualized coverage of 0.34 times (x) compared with 0.52x at YE2020 given the increased vacancy and 12 months of rental abatements given to Sedgwick (9.1% of net rentable area, expiring May 2033) upon its lease renewal. DBRS Morningstar analyzed the loan with an elevated PoD given the ongoing leasing struggles; however, the loan remains current.

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.

Class X-A is an interest-only (IO) certificate that references 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 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 [email protected].

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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