DBRS Morningstar Confirms Ratings on All Classes of WFRBS Commercial Mortgage Trust 2014-C25

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-C25 issued by WFRBS Commercial Mortgage Trust 2014-C25 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 B at AA (sf)
-- Class C at A (high) (sf)
-- Class PEX at A (high) (sf)
-- Class X-B at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-D at B (high) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the December 2021 remittance, there has been a collateral reduction of 15.5%, with 52 of the original 59 loans remaining and a current trust balance of $739.6 million. In addition to the successful repayments since issuance, the pool benefits from 15 loans that are fully defeased, representing 24.3% of the current pool balance, including four of the top 10 loans. Since issuance, there has been one loan, Elsinore Courtyard Apartments (Prospectus ID#20), liquidated, with the principal loss of $567,640 contained to the unrated Class G certificate. There are 10 loans on the servicer’s watchlist, representing 12.7% of the current pool balance, most of which are flagged for a low debt service coverage ratio (DSCR) due to performance declines during the pandemic. As of the December 2021 remittance, there are no loans in special servicing and no loans are reporting delinquent debt-service payments.

The largest loan on the servicer’s watchlist is Four Seasons Hotel – Seattle (Prospectus ID#4, 5.2% of the current pool balance), secured by a full-service luxury hotel property in downtown Seattle, Washington. The loan was added to the servicer’s watchlist in July 2020 for a low DSCR and was 90-days delinquent at that time. The servicer granted a forbearance in May 2020, which allowed the borrower to use furniture, fixture, and equipment (FF&E) reserve funds to cover debt service payments from April 2020 through December 2020. As of the December 2021 remittance, the loan remains current on its debt service payments. Given the subject’s desirable location, historically stable performance, compliance with the terms of the loan modification, and a recent growth in demand, DBRS Morningstar believes the overall increased risks from issuance remain moderate.

DBRS Morningstar does note there is one loan not currently on the servicer’s watchlist but showing notable performance declines from issuance in the Colorado Mills (Prospectus ID#2, 12.6% of the current pool balance) loan, which is secured by a regional mall located outside of Denver, Colorado. The mall has been on the radar for several years following a hail storm that took out a good portion of the property’s roof in 2017, which resulted in the property’s closure for six months while repairs were made. Cash flows fell during that time and remain depressed from the issuance figures, with occupancy reported at 76.0% for September 2021, down from 94.0% at issuance. The occupancy rate has been down since 2014 and fell as low as 71% as of the year-end 2020 reporting period. There are mitigating factors in the strong sponsorship in Simon Property Group and the in-place DSCR remains healthy, at 1.61 times, for the Q3 2021 reporting period.

At issuance, DBRS Morningstar shadow-rated one loan investment grade, St. John’s Town Center (Prospectus ID#1, 13.5% of the pool). With this review, DBRS Morningstar confirms the performance of the loan remains in line with the investment grade shadow rating.

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 ratings assigned to Class C, as the quantitative results suggested a higher rating. The material deviation is warranted given the uncertain loan-level event risk specifically related to Colorado Mills (Prospectus ID#2, 12.6% of the current pool balance) and Four Seasons Hotel – Seattle (Prospectus ID#4, 5.2% of the current pool balance). Although the two loans are currently not in default, the credit risks associated with those loans remain elevated since issuance.

Classes X-A, X-B, X-C, and X-D 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#4 – Four Seasons Hotel - Seattle (5.2% 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.

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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