DBRS Morningstar Confirms Ratings on COMM 2014-UBS5 Mortgage Trust

DBRS Inc. (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-UBS5 issued by COMM 2014-UBS5 Mortgage Trust:

-- 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 X-B1 at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class X-B2 at BB (high) (sf)
-- Class D at BB (sf)
-- Class E at CCC (sf)
-- Class F at C (sf)

DBRS Morningstar also discontinued and withdrew its rating on Class X-C as the reference obligation is Class E, which is rated CCC (sf). In addition, DBRS Morningstar changed the trends on Classes C and PEZ to Stable from Negative, while Class D and Class XB2 continue to carry Negative trends. The trends on all other classes remain Stable with the exception of Classes E and F, which have ratings that do not carry trends. In addition, DBRS Morningstar removed the Interest in Arrears designation on Class E while Class F continues to have Interest in Arrears.

At last review, DBRS Morningstar downgraded the ratings for four classes as a result of the increased risk of loss to the trust for select loans that were in special servicing at the time of the December 1, 2020, rating actions. The rating confirmations are generally reflective of DBRS Morningstar’s stable outlook for the transaction from last review. A driver loan at last review, Ridgmar Mall (Prospectus ID#13), was liquidated from the trust in July 2021, with a $19.1 million loss (loss severity of approximately 58%), slightly below the DBRS Morningstar-projected loss of $23.9 million.

As of the November 2021 remittance, eight loans, representing 19.9% of the pool, were in special servicing and eight loans, representing 28.6% of the pool balance, are on the servicer’s watchlist. Of the eight loans in special servicing, three loans with a cumulative balance of $62.1 million (5.8% of the pool balance) were liquidated, with loss severities ranging between 35% and 76%, all generally in line with the projections for those loans at last review. In addition to the slightly smaller loss realized for Ridgmar Mall as compared with the liquidation scenario assumed by DBRS Morningstar as part of the December 2020 surveillance review of this transaction, there have also been improvements in the outlook for the two largest loans in special servicing as loan modifications have been approved for each since last review. These factors contributed to the change in trend to Stable from Negative for the two classes as previously discussed.

According to the November 2021 remittance, 57 of the original 70 loans remain in the trust, with a trust balance of $1.1 billion, representing a collateral reduction of 24.2% since issuance as a result of loan repayments, scheduled amortization, and realized losses from liquidated loans. Nine loans, representing 14.5% of the current pool balance, are defeased. The pool has a concentration of loans secured by office and hospitality properties, each representing approximately 36% of the outstanding pool balance as of the November 2021 remittance. The largest loan on the watchlist, Loews Miami Beach Hotel (Prospectus ID#1, 11.2% of pool balance) and the largest loan in special servicing, 6100 Wilshire (Prospectus ID#6, 5.4% of the pool balance) are highlighted below.

The Loews Miami Beach Hotel is secured by a 790-key full service hotel located at Miami Beach, Florida. The loan represents a pari passu portion of the $300 million whole-loan that is held across three CMBS transactions issued in 2014, all three of which are rated by DBRS Morningstar. The loan was added to the servicer’s watchlist after the borrower requested relief due to Coronavirus Disease (COVID-19)-driven business disruptions. A forbearance was granted in the form of a deferral of monthly furniture, fixtures, and equipment reserve payments from May 2020 through to July 2020 and repayment of those amounts began in August 2020. Under the terms of the agreement, the borrower is expected to deposit one-ninth of the deferred amount each month while continuing to make scheduled debt service and all other payments.

As of the most recent reporting from the trailing 12 months (T-12) ended June 30, 2021, the loan reported a debt service coverage ratio (DSCR) of 0.98 times (x), which is down from the Q2 2020 DSCR of 1.65x and down from year-end (YE) 2019, when the loan reported a DSCR of 3.21x. An STR, Inc. (STR) report for the T-6 ended July 31, 2021, showed occupancy was 57.4%, with an average daily rate (ADR) of $422.25 and revenue per available room (RevPAR) of $242.52. The property has historically enjoyed preferred status within the market, but the July 2021 STR report showed the subject trailed the competitive set’s reported average occupancy of 68.7%, ADR of $358.04, and RevPAR of $245.87. However, with the return of transient travelers as a result of the borders reopening, demand should continue to rebound. Given the sponsor’s long-term ownership, renovations to the property in 2017, and the historically stable performance for the collateral hotel, DBRS Morningstar believes the overall risks for this loan remain stable from issuance.

The 6100 Wilshire loan is secured by a Class A office property located in the heart of the Miracle Mile District of Los Angeles. The loan transferred to the special servicer in October 2019 for imminent nonmonetary default due to the sponsor’s noncompliance with cash management provisions. In April 2019, CBS (20.6% of net rentable area, lease expiry April 2020) failed to renew its lease 12 months prior to its lease expiration, which caused a trigger event. The sponsor did not comply with the terms of the trigger event and ultimately the servicer determined that the borrower had misappropriated rents in the amount of $1.07 million and failed to comply with the lender’s request to remit those rents. The borrower then failed to comply with the lender’s request to remit those rents and a lawsuit for the same was filed against the borrower. However, as of October 2021, the servicer has confirmed these issues have been resolved and the loan is expected to be returned to the master servicer in the near term. The resolution of this dispute is a positive development for the loan since the last DBRS Morningstar review of this transaction, but given the loan’s pending return to the master servicer, the probability of default penalty applied at last review was maintained.

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, X-B1, and X-B2 are interest-only (IO) certificates 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.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrsmorningstar.com. DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Loews Miami Beach Hotel (11.2% of the pool)
-- Prospectus ID#6 – 6100 Wilshire (5.4% 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 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].

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