Morningstar DBRS Confirms All Credit Ratings of Morgan Stanley Bank of America Merrill Lynch Trust 2014-C14

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-C14 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2014-C14 as follows:

-- Class F at BB (sf)
-- Class X-C at B (high) (sf)
-- Class G at B (sf)

All trends are Stable.

The credit ratings confirmations follow a period of increased concentration as the pool winds down and continues to deleverage. Since the last credit rating action, 31 loans have repaid from the pool, resulting in the full repayment of Classes A1 through E, and leaving five of the original 58 loans remaining as of the May 2024 remittance. The three largest loans, representing 84.3% of the remaining trust balance, are in special servicing, having passed their respective maturity dates. The two smallest loans are performing but have extended maturity dates, indicating there will be limited principal reduction until the specially serviced loans are resolved. Given this concentration, Morningstar DBRS' analysis relied on a recoverability scenario for the remaining loans. The analysis indicates a high likelihood of ultimate recovery for Classes F and G, largely because of the significant credit support (more than 50%) provided by the unrated Class H bond. Despite this, Morningstar DBRS confirmed its below investment-grade ratings on Classes F and G and the interest-only (IO) Class X-C to reflect the pool's adverse selection and concentration of defaulted assets exhibiting performance declines.

The largest remaining loan in the pool is Hilton San Francisco Financial District (Prospectus ID#10; 57.2% of the pool). The loan is secured by a 543-room full-service hotel in downtown San Francisco's Financial District, close to Chinatown. The whole loan comprises a $45.0 million note securitized within the trust as well as a $52.0 million note securitized in the MSBAM 2014-C16 transaction, which is not rated by Morningstar DBRS. There is also an unsecuritized mezzanine debt that had a balance of $20.0 million at issuance. The loan transferred to the special servicer in November 2023 after the borrower indicated it would not be able to pay off the loan at its scheduled maturity in January 2024.

The subject's performance has not stabilized at pre-pandemic levels as of the most recent reporting, with net cash flow (NCF) and debt service coverage ratio (DSCR) reported at $6.2 million and 0.96 times (x) for the trailing 12 months (T-12) ended June 30, 2023, below the figures of $7.0 million and 1.09x in YE2022 and the Morningstar DBRS figures of $9.1 million and 1.42x at issuance. The September 2023 STR indicates that although the property continues to outperform its competitive set, market performance remains down. The occupancy rate, average daily rate and revenue per available room (RevPAR) were 81.1%, $213.92, and $173.45 for the T-12 period, all below the Morningstar DBRS figures of 87.6%, $216.75, and $189.87 at issuance. In addition, the RevPAR penetration rate was 108%, down significantly from 125% in the prior year.

As of the May 2024 remittance, the loan remains current and servicer commentary indicates the lender has approved a forbearance. The May 2024 distribution statement reported a $4.0 million paydown of the loan, and Morningstar DBRS considers this to be a sign that the borrower is committed to curing the default.

Given the loan's current payment status, no updated appraisal has been ordered, though Morningstar DBRS expects the property value has deteriorated since issuance. Servicer commentary and the recent principal paydown suggest the loan will be extended; however, Morningstar DBRS' analysis considered a liquidation of this loan to test the durability of the ratings. As noted above, the ample credit support provided by the unrated Class H means this loan could withstand a significant reduction in value without exposing any of the rated bonds to a loss.

The second largest loan in the pool is the Fairfield Inn Portfolio (Prospectus ID# 29; 14.6% of the pool), secured by two limited-service hotels totaling 197 rooms in St. Charles and Naperville, Illinois. The loan transferred to special servicing in August 2020 for payment default following performance issues brought on by the pandemic. The portfolio's performance rebounded slightly in 2023, reporting an annualized NCF of $1.2 million and DSCR of 0.82x in June 2023 compared with $0.82 million and 0.55x in YE2022; however, both properties continue to underperform the competitive set, reporting a weighted-average RevPAR penetration of 93.2%. According to the servicer, the borrower continues to search for refinancing options, however, the workout strategy remains uncertain. An updated November 2023 appraisal valued the portfolio at $15.5 million, representing a 17.6% decline from the issuance value of $18.8 million. Morningstar DBRS' liquidation scenario considered a conservative haircut to the November 2023 appraised value.

The third loan in special servicing is Walgreens - Roseville, MN (Prospectus ID#39; 12.5% of the pool), secured by a single-tenant retail property in Roseville, Minnesota. The property is 100% occupied by Walgreens on a lease through March 2085. Performance has remained stable through the loan term, and the most recent DSCR was reported to be 1.63x. The loan transferred to special servicing in February 2024 for maturity default. The borrower has since submitted a request for an extension, which the servicer is currently evaluating. An April 2024 appraisal valued the property at $10.2 million, down from $11.5 million at issuance.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS 
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (January 23, 2024), at https://dbrs.morningstar.com/research/427030.

Class X-C is an IO certificate that references 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

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

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

Morningstar DBRS notes that a sensitivity analysis was not performed for this review as the transaction is in wind-down, with only a few loans remaining. In those cases, the Morningstar DBRS credit ratings are typically based on a recoverability analysis for the remaining loans. Additionally, sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit 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.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

-- North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- Rating North American CMBS Interest-Only Certificates (December 13, 2023), https://dbrs.morningstar.com/research/425261
-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023), https://dbrs.morningstar.com/research/420982
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592

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