DBRS Morningstar Confirms Ratings on All Classes of COMM 2014-LC15 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2014-LC15 issued by COMM 2014-LC15 Mortgage Trust as follows:

-- 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 (sf)
-- Class C at A (sf)
-- Class PEZ at A (sf)
-- Class X-B at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at B (sf)
-- Class F at CCC (sf)

DBRS Morningstar maintained the Negative trend on Class E, while Class F carries a rating with no trend. In addition, DBRS Morningstar maintained the Interest in Arrears designation on Class F. All remaining classes have Stable trends.

The rating confirmations reflect the overall stable performance of the pool while the Negative trend on Class E is reflective of the ongoing concern regarding the loans in special servicing. As of the January 2022 remittance, 38 of the original 48 loans remain in the pool. Four loans (representing 3.0% of the pool) are defeased. Ten loans are on the servicer’s watchlist and four loans are in special servicing, representing 20.3% and 11.7% of the pool, respectively. Since the last review, the McKinley Mall loan was liquidated from the trust at a loss of $7.1 million, which was in line with the DBRS Morningstar estimate of a $7.5 million loss. The loss was contained to the non-rated Class G, which has now factored down by 44% because of losses.

The largest loan in special servicing is Marriott Downtown Hartford (Prospectus ID#8; 6.4% of the pool), which is secured by a full-service hotel in Hartford, Connecticut. The loan was transferred to the special servicer in July 2020 and was last paid through October 2020. The subject was affected by the pandemic and the borrower has requested relief in the form of a forbearance, which the special servicer is evaluating while dual-tracking other remedies. Based on the March 2021 appraisal, the property was valued at $59.9 million, which is an 11.5% decline from the issuance value of $67.7 million but still above the outstanding loan balance of $39.7 million. Pre-pandemic, the loan was performing quite well with the YE2019 debt service coverage ratio at 1.90 times. According to the financial statements for the trailing six months ended June 30, 2021, the loan reported a negative cash flow. The property reported an occupancy rate, average daily rate, and revenue per available room (RevPAR) of 33.2%, $145.77, and $48.42, respectively, for the trailing three months ended June 30, 2021. These figures lag those of the competitive set as the property’s RevPAR penetration was just 86.3%, albeit an improvement from the RevPAR of $27.27 for the trailing 12 months ended June 30, 2021. The property’s reliance on the adjacent Connecticut Convention Center as a driver may result in a longer recovery period as convention business is slow to return, however, the most recent value likely gives the borrower an incentive to find common ground on a forbearance.

The second-largest specially serviced asset is the Hilton Garden Inn Houston (Prospectus ID#14; 2.9% of pool). The loan had been in special servicing prior to the pandemic and became real estate owned in June 2021. As of the June 2021 appraisal, the property, a full-service hotel in Houston, was valued at $14.8 million, which is an improvement from the September 2020 value of $12.5 million but below the issuance value of $31.6 million and the outstanding loan balance of $18.2 million. Considering the property was struggling before the pandemic, DBRS Morningstar anticipates any meaningful recovery in performance would be minimal and expects a moderate loss to the trust upon resolution.

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 and X-B 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#8 – Marriott Downtown Hartford (6.4% 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 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.

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.

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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