DBRS Morningstar Confirms All Classes of Morgan Stanley Capital I Trust 2014-150E

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-150E issued by Morgan Stanley Capital I Trust 2014-150E as follows:

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BB (high) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The $525.0 million transaction is backed by the leasehold interest and subleasehold interest in 150 East 42nd Street, a 42-story Class A office tower totaling 1.7 million square feet (sf) located directly across from Grand Central Terminal in Midtown Manhattan. The tower occupies the entire block bounded by Lexington Avenue, East 42nd Street, Third Avenue, and East 41st Street. The total debt stack includes an unsecuritized $175.0 million mezzanine loan that is co-terminus with the interest-only (IO) 10-year first mortgage.

The property is currently anchored by investment-grade tenants Wells Fargo Bank, N.A. (Wells Fargo; rated AA with a Negative trend by DBRS Morningstar), which leases 461,514 sf (27.0% of net rentable area (NRA)) through 2028, and Mount Sinai Hospital, which leases 448,819 sf (26.3% of NRA) through 2046, that occupy a combined 53.3% of the property’s NRA. The third-largest tenant, Dentsu Aegis Network (Aegis), leases 206,175 sf (12.1% of NRA) through 2028.

In 2020, Wells Fargo relocated its Manhattan headquarters to 30 Hudson Yards after it signed a lease for 500,000 sf of space. Furthermore, Aegis had executed a lease for 320,000 sf at the Morgan North Postal facility at 341 Nineth Avenue in West Chelsea, suggesting potential for either or both tenants to consolidate operations at new locations. According to the servicer, neither tenant has expressed any intention to vacate the subject property ahead of its respective lease expiration, and neither tenant is currently subleasing any of its space. Both of these leases extend beyond the 2024 loan maturity and, according to the December 2021 rent roll, both tenants are paying well below market rents. According to Reis, asking rents within the Grand Central submarket were $75.50 per sf (psf) with a vacancy rate of 10.7% as of YE2021, compared to the YE2020 asking rental rate of $78.30 psf and vacancy rate of 8.8%. In comparison, Wells Fargo and Aegis pay $56.64 psf and $59.00 psf, respectively.

The property was 94.4% occupied as of YE2021 with a debt service coverage ratio (DSCR) of 1.82 times (x), compared to the YE2020 DSCR of 1.78x and YE2019 DSCR of 1.76x. Only 5.6% of the NRA is scheduled to roll in the next 12 months.

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 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 this transaction.

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.

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.

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

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