DBRS Morningstar Confirms Ratings on All Classes of COMM 2014-CCRE15 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) confirmed the following ratings of the Commercial Mortgage Pass-Through Certificates, Series 2014-CCRE15 issued by COMM 2014-CCRE15 Mortgage Trust:

-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (sf)
-- Class PEZ at AA (sf)
-- Class X-B at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BB (high) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains relatively unchanged from the prior rating action. The financial performance of the pool is generally healthy, but it is noteworthy that there is a high concentration of loans collateralized by office properties, representing 40.3% of the pool balance. In general, the performance of the office sector has been challenged, given the low investor appetite for the property type and high vacancy rates in many submarkets as a result of the shift in workplace dynamics. In the analysis for this review, loans backed by office properties and other properties that were showing performance declines from issuance or exhibiting increased risks from issuance were analyzed with stressed scenarios to increase the expected losses as applicable. The resulting weighted-average (WA) expected loss for the stressed office loans was slightly above the pool average expected loss.

As of the June 2023 remittance, 31 of the original 49 loans remain in the trust with an outstanding trust balance of $571.5 million, reflecting a collateral reduction of 43.3% since issuance. Eleven loans, representing 23.6% of the trust balance, are defeased. Seven loans, representing 24.8% of the trust balance, are on the servicer’s watchlist, primarily because of low debt service coverage ratios (DSCRs), recent or upcoming lease expirations, and/or delinquent servicing advances. Two loans, which represent 4.5% of the trust balance are in special servicing. To date, three loans have been liquidated from the pool, resulting in realized losses to the trust of $18.9 million, which have been contained to the nonrated Class G certificate, and generally offset by continued amortization of loans and defeasance held in the trust.

River Falls Shopping Center (Prospectus ID#15; 2.6% of the pool balance), the largest specially serviced loan, is secured by a 287,821 square foot (sf) portion of a larger 872,969-sf anchored retail shopping center in Clarksville, Indiana, approximately three miles northwest of the Louisville central business district. The loan transferred to special servicing in May 2020 after the borrower requested financial relief and a forbearance agreement was ultimately granted. To date, all deferred amounts have been repaid. Based on the trailing six-month ended June 2023 period (T-6) financials, the loan reported a DSCR of 1.10 times (x), a slight improvement from the YE2020 DSCR of 1.05x but below the DBRS Morningstar DSCR of 1.27x. The servicer reported an occupancy rate of 100% over the last few years. The March 2023 appraisal reported a value of $19.2 million, which is a slight decline from the November 2021 value of $20.7 million and considerably below the issuance value of $24.0 million. Despite the value decline, the current loan-to-value ratio (LTV) of 78.5% is generally in line with the issuance LTV of 74.9% as the loan benefits from amortization. Given the loan has been in special servicing for an extended period of time without any resolution and the financial performance has declined from issuance expectations, DBRS Morningstar applied a probability of default penalty in its analysis, resulting in an expected loss that was about 50% higher than the WA expected loss of the pool.

625 Madison Avenue (Prospectus ID#3, 14.8% of the pool) is collateralized by the borrower’s leased fee interest in a 0.81-acre (35,146 sf) parcel of land at 625 Madison Avenue in Midtown Manhattan. The ground-lease tenant, SL Green (SLG), owns the improvements, a 17-story, Class A, mixed-use building with approximately 37,969 sf of ground- and second-floor retail space and 525,031 sf of office space that sits on top of the land. The ground-lease tenant’s interest in the improvements is not collateral for the 625 Madison Avenue loan. The loan was interest only (IO) through its anticipated repayment date (ARD) in December 2018, with principal paydown from excess cash post-ARD.

SLG and Ben Ashkenazy (the loan sponsor) have been involved in a protracted and ongoing dispute since Ashkenazy bought the land in 2014 for $400.0 million. At that time, SLG’s ground rent was $4.6 million per annum, a figure well below market, according to Ashkenazy. In April 2023, Ashkenazy was successful in raising the rent on the ground lease to $20.5 million after an arbitration ruling in his favor. However, SLG is now moving forward with foreclosing on Ashkenazy’s interest in the land after he defaulted on a $195.0 million mezzanine loan (which SLG owns a stake in) backing his position. At issuance, the unencumbered value of the land was appraised at $460 million, well above the current whole loan balance of $194.4 million. DBRS Morningstar expects that the land has largely retained its value given its prime location and development potential. The servicer noted that the borrower is continuing to make its debt service payments beyond its ARD of December 6, 2018. According to the YE2022 financials, the improvements were 100% occupied, with a DSCR of 1.03x, in line with historical metrics. Given the ongoing dispute, DBRS Morningstar took a conservative approach for this review and applied a stressed LTV ratio to increase the expected loss, resulting in an expected loss that is more than triple the loan’s baseline expected loss.

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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023), which can be found on 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 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, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

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 (June 9, 2023;)
https://www.dbrsmorningstar.com/research/415687

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].