DBRS Morningstar Confirms Ratings on All Classes of COMM 2014-UBS6 Mortgage Trust, Maintains Negative Trends on Five Classes

DBRS, Inc. (DBRS Morningstar) confirmed its ratings of the Commercial Mortgage Pass-Through Certificates, Series 2014-UBS6 issued by COMM 2014-UBS6 Mortgage Trust as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 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)
-- Class E at BB (low) (sf)
-- Class X-D at B (sf)
-- Class F at B (low) (sf)
-- Class G at C (sf)

The trends on Classes X-C, D, E, X-D, and F are Negative. The rating on Class G does not carry a trend. All other trends are Stable. At last review, in December 2020, DBRS Morningstar downgraded Classes X-C, D, E, X-D, and F and they all carried Negative trends. The Negative trends continue to reflect concerns largely surrounding the loans in special servicing and otherwise showing performance declines that, in some cases, were driven by the effects of the Coronavirus Disease (COVID-19) pandemic.

At issuance, the transaction consisted of 89 fixed rate loans, secured by 267 commercial and multifamily
properties, with an original principal balance of $1.28 billion. As of the October 2021 remittance, 76 loans remain, with a current pool balance of $1.06 billion, representing a collateral reduction of 17.3%. To date, two loans, Cray Plaza (Prospectus ID #27) and Black Gold Suites Hotel Portfolio (Prospectus ID #42), have been liquidated with total realized losses to the trust of $18.1 million, which has been contained to Class H, which DBRS Morningstar does not rate. The pool benefits from 13 loans (representing 9.7% of the current pool), which are fully defeased. Loans secured by retail properties account for the largest concentration by property type, representing over 30.0% of the current pool balance, with loans backed by lodging properties showing the second-highest concentration, at approximately 18.0% of the current pool balance. The concentration of retail and lodging properties exposes the pool to greater risk as those property types have generally been more affected by pandemic-related performance issues than other property types.

As of the October 2021 reporting, there were seven loans in special servicing (representing 10.0% of the current pool) and 19 loans being monitored on the servicer’s watchlist (representing 26.8% of the current pool). The specially serviced loans include four loans backed by lodging properties and one loan secured by a retail property. Each of the loans in special servicing was in special servicing at the time of DBRS Morningstar’s review in December 2020, as well, and each is at least 90 days delinquent. Three of the specially serviced loans are past their respective scheduled maturity dates.

The largest loan in special servicing, University Village (Prospectus ID #5; 3.6% of the current pool balance), is secured by the borrower’s fee-simple interest in a 456-unit (1,164-bed) student housing complex located less than two miles from the University of Alabama in Tuscaloosa. The loan transferred to special servicing in July 2019 for imminent default, with the sponsor noting preleasing was negatively affected by numerous shootings and criminal activity at the property, with the preleased rate only reaching 44.8% for the coming 2019–2020 academic year at the time of the loan’s transfer, one month before the fall 2019 semester was set to begin. A receiver was installed in 2019 and workout negotiations have been ongoing since the loan’s transfer. The receiver has been working to improve property performance and rebranded the complex with a new name as the property is now known as The Path @ Tuscaloosa. Updated financial information has been limited, but the special servicer’s most recent commentary noted that the property was only 46.3% occupied as of July 2021, down from 96.3% at issuance. Further, as of July 2021, the property was only 33.3% preleased for the 2021–2022 school year. An updated appraisal was received in March 2020, which valued the property at $24.3 million, down 59.8% from the issuance appraised value, and well below the total exposure of $46.3 million as of the October 2021 remittance. The resulting loan-to-value ratio based on the March 2020 appraised value is 164.0%. It is unclear why the special servicer has not provided an updated appraisal given the March 2020 figure is now well over a year old, but it is unlikely there has been an improvement given the recent occupancy metrics reported by the servicer, as previously noted. In its analysis, DBRS Morningstar assumed a haircut to the March 2020 appraised value and liquidated the loan from the trust, resulting in a modeled loss severity approaching 80.0%.

The other nine specially serviced loans in the pool were either analyzed with a loss scenario based on the most recent appraised value and DBRS Morningstar’s expected loss severity at resolution or, in cases where a workout was expected that would return the loan to the master servicer, a probability of default (PD) penalty was applied to reflect the performance and/or value declines for the underlying collateral since issuance. In total, DBRS Morningstar assumed liquidation losses of approximately $35.0 million with this review.

The largest loan being monitored on the servicer’s watchlist, University Edge (Prospectus ID #7; 3.3% of the current pool balance), is secured by the borrower’s fee-simple interest in a newly constructed 148-unit (578 bed) luxury student housing project, directly across the street from the University of Akron, in Akron, Ohio. The property, which was built between 2013 and 2014, also includes 18,380 square feet of street level retail, with largest tenant (Chipotle Mexican Grill) occupying 13.3% of the retail portion’s net rentable area. The loan was added to the servicer’s watchlist in August 2020 and as of the October 2021 reporting, it was being monitored for a low debt service coverage ratio (DSCR) and resulting activation of cash management. Property performance has been declining since it peaked in 2016 and dipped below the issuance figures starting with the YE2019 reporting, trends that were exacerbated by the expiration of an initial interest-only (IO) period in 2019. The YE2019 and YE2020 net cash flow figures were down 6.2% and 40.3% from the issuance figure, respectively, and the servicer most recently reported a DSCR of 0.66 times for the annualized June 2021 reporting period. The June 2021 rent roll showed an occupancy rate of 87.5% for the apartments and an occupancy rate of 80.8% for the retail component. The performance trends have generally been attributed to declining enrollment at the University of Akron, which was down by 28.8% for the fall 2020 semester as compared with the fall 2014 semester. The loan remains current and to date, no relief request has been reported by the servicer. Given the sustained performance declines, DBRS Morningstar applied a PD penalty in the analysis for this review, significantly increasing the expected loss.

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 quantitative model when determining the rating assigned to Class D by assigning a rating higher than the lower rating implied by the quantitative model. The material deviation is warranted given uncertain loan-level event risk.

Classes X-A, X-B, X-C, and X-D are 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. 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 [email protected].

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429