Morningstar DBRS Downgrades Two Classes of Citigroup Commercial Mortgage Trust 2014-GC21

DBRS, Inc. (Morningstar DBRS) downgraded the credit ratings on two classes of Commercial Mortgage Pass-Through Certificates, Series 2014-GC21 issued by Citigroup Commercial Mortgage Trust 2014-GC21 as follows:

-- Class E to CCC (sf) from B (sf)
-- Class X-C to CCC (sf) from B (high) (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class F at C (sf)
-- Class X-B at A (high) (sf)
-- Class X-D at C (sf)
-- Class PEZ at A (sf)

The trends on Classes C, D, X-B, and PEZ have been changed to Stable from Negative. Classes E, F, X-C, and X-D have credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS) transactions.

The credit rating actions reflect Morningstar DBRS' recoverability expectations for the remaining loans in the pool. Since the last credit rating action in January 2024, 31 loans have repaid from the pool, leaving only three remaining, all of which are in special servicing. Given the concentration of defaulted loans, Morningstar DBRS' analysis included liquidation scenarios for all three loans to determine the recoverability of the outstanding bonds. Based on various stresses to the most recent appraised values, Morningstar DBRS concluded that liquidation losses would be contained to the Class E certificate, the primary consideration for the downgrade of Class E. Morningstar DBRS' liquidation scenarios also suggested Classes C and D were well insulated from losses, which was a key factor in the trend change to Stable for those classes. Morningstar DBRS notes that the disposition timeline for the remaining assets is uncertain, and although all three loans are current as of the November 2024 remittance, there is increased propensity for interest shortfalls given the makeup of the remaining collateral.

Morningstar DBRS' loss expectations are primarily driven by the largest remaining loan in the pool, Maine Mall (Prospectus ID#1, 80.8% of the pool), which is secured by a 730,444 square foot (sf) portion of a 1.0 million sf super-regional mall in Portland, Maine. The $125.0 million loan is pari passu with a note securitized in the GS Mortgage Securities Trust 2014-GC22 transaction, which is also rated by Morningstar DBRS. The loan transferred to the special servicer in February 2024 following the borrower's notification that it would be unable to repay the loan at scheduled maturity in April 2024. According to the November 2024 remittance, the special servicer is discussing workout strategies with the borrower, while dual tracking foreclosure. Occupancy at the subject has declined in recent years, reported at 84.1% as of the June 2024 rent roll, down from 97% at issuance. In addition, approximately 39.5% of the collateral tenants have lease expiries within the next 12 months. Cash flow has been stabilizing, however, and Morningstar DBRS notes that the nearest competing mall is located 37 miles away. An August 2024 appraisal valued the property at $196.0 million, down from the issuance appraised value of $395.0 million. Given the declining occupancy, high near-term rollover, and considerable decline in value, Morningstar DBRS used a liquidation scenario based on a haircut to the August 2024 appraised value, which implied loss severity of nearly 40.0%.

The two other remaining loans in the pool, Regional One Medical (Prospectus ID#11, 10.0% of the pool) and Brier Creek Corporate Center 6 (Prospectus ID#12, 9.2% of the pool), are secured by office properties in Memphis, Tennessee, and Raleigh, North Carolina, respectively. Both loans defaulted at maturity and are in special servicing. Both assets received updated appraisals, dated August 2024, which indicated value decline from issuance; however, even with conservative haircuts applied to those values, Morningstar DBRS' loss expectations for these loans are not considered material to the analysis.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-factors-in-credit-ratings).

Classes 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 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/north-american-cmbs-surveillance-methodology).

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 traditional model-based sensitivity was not performed, however, Morningstar DBRS notes that the credit ratings are sensitive to the recoverability assumptions on the three remaining loans that are detailed in the accompanying press release. Should recoverability of the remaining loans be lower than that implied by the stressed values in the latest analysis, credit ratings lower in the capital stack would be those most negatively impacted.   

DBRS, Inc.
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Chicago, IL 60602 USA
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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; https://dbrs.morningstar.com/research/428797/north-american-cmbs-multi-borrower-rating-methodology)

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024; https://dbrs.morningstar.com/research/439702/morningstar-dbrs-north-american-commercial-real-estate-property-analysis-criteria)

-- Legal Criteria for U.S. Structured Finance (December 3, 2024; https://dbrs.morningstar.com/research/444064/legal-criteria-for-us-structured-finance)

-- Rating North American CMBS Interest-Only Certificates (June 28, 2024; https://dbrs.morningstar.com/research/435294/rating-north-american-cmbs-interest-only-certificates)

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024; https://dbrs.morningstar.com/research/438283/north-american-commercial-mortgage-servicer-rankings)

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.