DBRS Morningstar Changes Trends on Five Classes of COMM 2014-LC17 Mortgage Trust, Confirms Ratings on All Classes

DBRS Limited (DBRS Morningstar) confirmed the following ratings of the Commercial Mortgage Pass-Through Certificates, Series 2014-LC17 issued by COMM 2014-LC17 Mortgage Trust:

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

DBRS Morningstar has changed the trends to Stable from Negative on Classes C, PEZ, D, X-B, and X-C. All trends are Stable, excluding Classes E, F, and G, which have ratings that do not carry trends; however, Class G continues to carry the Interest in Arrears designation.

The trend changes primarily reflect the better-than-anticipated disposition of two distressed loans since the last review and updated valuations for the five loans, representing 7.8% of the current pool balance, still in specially servicing. In May 2021, the $18.0 million World Houston Plaza (Prospectus ID#20) loan was liquidated from the trust with a realized loss of $12.4 million, while the Georgia Multifamily Portfolio (Prospectus ID#35) loan avoided foreclosure and was repaid in full. The trust has incurred realized losses of $32.6 million to date, which has resulted in the nonrated Class H being written down by more than 85%. DBRS Morningstar expects further erosion to the transaction’s credit support upon resolution of a few of the remaining specially serviced assets, with projected losses reaching the rated Class G.

As of the February 2022 remittance, 53 of the original 71 loans remain in the pool, with an aggregate principal balance of $801.0 million, reflecting a collateral reduction of 35.2% since issuance as a result of loan repayments, scheduled amortization, and the liquidation of three loans. In addition, nine loans, representing 7.4% of the pool, have been fully defeased. By property type, the pool is most concentrated by loans secured by hotels, retail properties, and offices, representing 24.9%, 24.0%, and 20.0% of the pool, respectively. The largest geographic concentration by state is Florida, representing 17.1% of the current pool balance, followed by California at 15.2%. There are 10 loans, representing 24.6% of the current pool balance, on the servicer’s watchlist, primarily because of cash flow declines stemming from the impact of the Coronavirus Disease (COVID-19) pandemic.

The two largest loans in special servicing, cumulatively representing 5.2% of the current pool balance, are both with the special servicer for payment default but appear to have promising workout resolutions. Aloft Cupertino (Prospectus ID#6, 3.9% of the pool) is secured by a 123-key, limited-service hotel in Cupertino, California. Prior to the pandemic, the property outperformed issuance expectations, benefitting from its location in Silicon Valley and the surrounding area’s corporate demand. The lender and borrower have tentatively agreed to a loan modification, which would reinstate the loan. The property was reappraised in December 2021 at $54.1 million, reflecting a moderate loan-to-value (LTV) ratio of 62.3% based on the total loan exposure.

Broadmoor Towne Center (Prospectus ID# 35; 1.9% of the pool) is secured by the leasehold interest in a 143,797-square-foot shopping centre in Colorado Springs, Colorado. The loan has underperformed since the Gordmans at the property closed in 2020 after its parent company filed for bankruptcy. While the property was most recently reported at 88% occupancy, the largest tenant, The Rush Market (34.7% of the NRA), which backfilled the Gordmans space, is month to month after its lease expired in July 2021. As of Q2 2021, the loan reported a debt service coverage ratio (DSCR) of 1.10 times (x). The borrower was unable to repay the loan upon its November 2021 maturity. However, the servicer has indicated that the borrower is under contract to sell for more than the most recently appraised value, with closing anticipated in mid-March 2022. The property was reappraised in November 2021 for $14.5 million, reflecting a moderate LTV ratio of 75.5% based on the total loan exposure.

The largest loan on the watchlist and in the pool, Loews Miami Beach Hotel (Prospectus ID#1; 15.0% of the pool), is secured by a 790-key, full-service hotel in Miami. The loan has a pari passu structure, with loan pieces in the subject trust and two other DBRS Morningstar-rated transactions (COMM 2014-CCRE21 Mortgage Trust and COMM 2014-UBS5 Mortgage Trust). The loan was initially added to the watchlist in July 2020 following a decline in performance and the borrower’s coronavirus relief request. The servicer granted relief in the form of a deferral of monthly furniture, fixture, and equipment reserve payments from May 2020 through July 2020, with the deferred amounts to be repaid over a nine-month period ended May 2021. As of the trailing nine months ended September 30, 2021, the loan reported a DSCR of 1.05x and an occupancy of 50.4%, which is down significantly from YE2019 when the loan reported a DSCR of 3.21x and an occupancy of 85.40%. Given the property’s prime location within South Beach, the hotel is well positioned to capture demand as leisure and business travel continue to rebound over the next few years.

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 on the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#6 – Aloft Cupertino (3.92% of the pool)

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 North American CMBS Surveillance Methodology (March 4, 2022), 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.

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

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