DBRS Morningstar Confirms All Ratings of Citigroup Commercial Mortgage Trust 2014-GC21

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-GC21 issued by Citigroup Commercial Mortgage Trust 2014-GC21 as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since the last rating action. As of the May 2023 remittance, 52 of the original 70 loans remain in the pool with a current trust balance of $670.9 million, representing a collateral reduction of 35.5% since issuance. Twenty loans, representing 24.5% of the current pool balance, are fully defeased. There is only one loan in special servicing, Talbot Town Center & 32 North Washington Street (Prospectus ID#42, 1.2% of the pool), and only six loans, representing 7.8% of the pool, are on the servicer’s watchlist. Office properties represent 4.6% of the current pool balance, which is a low concentration. Where applicable, DBRS Morningstar increased the probability of default penalties, and, in certain cases, applied stressed loan-to-value (LTV) ratios for loans that are secured by office properties, given the low investor appetite for the property type and the locations of these properties in secondary and tertiary markets. The weighted-average expected loss for office loans was approximately double the weighted-average pool expected loss.

The largest loan on the servicer’s watchlist, Lanes Mill Marketplace (Prospectus ID#9, 3.1% of the pool), is secured by a 145,370-square-foot (sf) retail power center in Howell, New Jersey. The loan was added to the servicer’s watchlist in November 2018 for a low debt service coverage ratio (DSCR), and performance remains depressed as of this review.

The subject is situated in a high-traffic commercial corridor and is shadow-anchored by Target and Lowe’s. As of the December 2022 rent roll, the collateral was 98.1% occupied. The property is anchored by a grocery store, Stop & Shop (45.7% of net rentable area (NRA), lease expiry in December 2028), with additional major tenants Crest Furniture (16.9% of NRA, lease expiry in April 2028) and Five Below (5.2% of NRA, lease expiry in January 2024).

As of YE2022, the property reported a DSCR of 0.82 times (x) and a net cash flow (NCF) of $1.2 million, which remains below the DBRS Morningstar NCF of $1.7 million primarily because of a lower reported base rent and a granular uptick in expenses. Leasing activity since the height of the Coronavirus Disease (COVID-19) pandemic has been strong. Occupancy had dropped to 75.9% in 2020 but improved to 98.1% as of December 2022. Tenant sales have dipped significantly since issuance, with Stop & Shop reporting YE2021 sales of $294.43 per sf (psf) compared with the issuance figure of $446.00 psf. Leases representing 11.8% of the NRA are scheduled to expire in the next 12 months.

The only loan in special servicing, Talbot Town Center & 32 North Washington Street (Prospectus ID#42, 1.2% of the pool), is secured by a 108,950-sf retail center in Easton, Maryland. The loan transferred to special servicing in May 2021 following a borrower request for pandemic relief. As of the May 2023 remittance, the special servicer’s reported workout strategy is a discounted payoff; however, the borrower continues to attempt to secure takeout financing ahead of its April 2024 maturity date. A February 2021 appraisal valued the combined properties at $6.7 million, which is below the current loan balance of $7.8 million. DBRS Morningstar’s analysis includes a liquidation scenario, based on a stress to the most recent appraised value, with an implied loss severity in excess of 35%.

DBRS Morningstar also continues to monitor the largest loan in the pool, Maine Mall (Prospectus ID#1, 18.6% of the pool), as it approaches its maturity date in April 2024. The loan was previously on the servicer’s watchlist for a low DSCR. The loan is secured by 730,444-sf portion of a 1.0 million-sf super-regional mall approximately 6 miles from the central business district in Portland, Maine. Previously, the servicer and the sponsor, Brookfield Properties Retail Group, executed a forbearance agreement in November 2020. Brookfield provided rent deferrals to multiple tenants in 2020, and the loan has never been delinquent. Although occupancy has remained stable at 94.0% as of March 2023, the servicer reported NCF and DSCR figures of $15.4 million and 1.39x, respectively, with the NCF remaining well below the $20.4 million NCF at issuance. Given the property type, secondary market location, decline in revenue, and near-term maturity, DBRS Morningstar applied an elevated probability of default in its analysis.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

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.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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].

This rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)

North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022; https://www.dbrsmorningstar.com/research/402153)

Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)

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