DBRS Morningstar Upgrades Four Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2014-C14

DBRS Limited (DBRS Morningstar) upgraded its ratings on four classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-C14 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2014-C14 as follows:

-- Class X-B to AAA (sf) from AA (high) (sf)
-- Class B to AA (high) (sf) from AA (sf)
-- Class C to A (sf) from A (low) (sf)
-- Class PST to A (sf) from A (low) (sf)

In addition, DBRS Morningstar confirmed the remaining classes as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (high) (sf)
-- Class F at BB (sf)
-- Class X-C at B (high) (sf)
-- Class G at B (sf)

DBRS Morningstar changed the trends on Classes X-C, F, and G to Stable from Negative. All other trends are Stable.

The trend changes for the lowest rated classes are generally reflective of the better-than-expected outcome for a recently disposed loan in Aspen Heights – Columbia (Prospectus ID#7), which had been in special servicing for several years and was liquidated from the trust as of October 2021 with a loss of approximately $20.0 million, representing a loss severity of 41.0%. Losses were contained to the non-rated Class H certificate. Historically, DBRS Morningstar had estimated much higher loss severities and most recently assumed a scenario that resulted in a loss of $35.3 million (loss severity of 71.8%), based on the September 2020 appraised value of $28.7 million. The servicer obtained an updated appraisal in August 2021, showing a value improvement to $35.2 million, compared with the proceeds received at resolution of $37.5 million.

The rating upgrades and confirmations are reflective of the overall stable performance of the pool, which benefits from significant paydown since issuance, with a collateral reduction of 49.5% as of the November 2021 remittance. Of the original 58 loans, 41 remain and three of those loans, representing 4.7% of the pool balance, are fully defeased. There are some things to monitor, including four loans in special servicing and 11 loans on the servicer’s watchlist, representing 10.2% and 27.7% of the pool, respectively. In general, DBRS Morningstar believes that the overall risk associated with those loans remains moderately elevated from issuance and notes that the rated bonds continue to benefit from a sizable remaining balance of $42.9 million in the first loss piece in the unrated Class H certificate.

At issuance, DBRS Morningstar shadow-rated the JW Marriott and Fairfield Inn & Suites loan (Prospectus ID#5, 9.6% of the pool balance) as investment grade. The loan is secured by two hotel properties (JW Marriott Hotel and Fairfield Inn & Suites) in Indianapolis and was on the servicer’s watchlist because of a low debt service coverage ratio and occupancy rate, driven by the Coronavirus Disease (COVID-19) pandemic. The hotel and tourism industry was affected by the pandemic but the collateral is well located near the Indiana Convention Center and Lucas Oil Stadium. The subject has historically outperformed its competitors and has demonstrated signs of recovery. With this review, DBRS Morningstar confirms that the loan characteristics remain in line with the investment-grade shadow rating.

The largest loan in special servicing is Round Rock Crossing (Prospectus ID#14, 3.9% of the pool balance), which is secured by an anchored retail centre in Round Rock, Texas. The loan has been in special servicing since June 2020 for imminent monetary default as a result of the pandemic. Performance has been declining since Gander Mountain vacated in 2017, and more recently, Stein Mart vacated in 2020, resulting in a physical occupancy rate of just over 50.0%. The servicer took title of the property in May 2021 and is targeting a sale in 2023, suggesting that the servicer hopes to stabilize the property and improve occupancy. According to the June 2021 appraisal, the property was valued at $40.2 million, which is a slight decline from the issuance value of $45.6 million. The collateral does benefit from its desirable location and strong shadow anchors in the area. Given the recently reported value, the subject’s location, and the servicer’s lease-up plans, DBRS Morningstar is cautiously optimistic that upon resolution, the loss will be relatively small.

ESG CONSIDERATIONS
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, and X-C 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#5 – JW Marriott and Fairfield Inn & Suites (9.6% of the pool)
-- Prospectus ID#8 – Stonestown Galleria (6.3% of the pool)
-- Prospectus ID#14 – Round Rock Crossing (3.9% 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 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.

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

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