Morningstar DBRS Downgrades the Credit Rating on One Class of WFRBS Commercial Mortgage Trust 2014-C21, Changes Trends on Five Classes to Stable

DBRS Limited (Morningstar DBRS) downgraded the credit rating on one class of Commercial Mortgage Pass-Through Certificates, Series 2014-C21 issued by WFRBS Commercial Mortgage Trust 2014-C21 as follows:

-- Class F to C (sf) from CCC (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-S at AAA (sf)
-- Class B at A (sf)
-- Class C at BBB (sf)
-- Class D at B (sf)
-- Class E at CCC (sf)
-- Class X-A at AAA (sf)
-- Class X-B at B (high) (sf)
-- Class X-C at CCC (sf)
-- Class PEX at BBB (sf)

Morningstar DBRS changed the trends on Classes B, C, D, X-B, and PEX to Stable from Negative; the trends on Classes A-S and X-A remain Stable. There are no trends on Classes E, F, and X-C, which have credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS) credit ratings.

Since the last credit rating action, 80 loans have repaid from the trust, resulting in a pool that is now extremely concentrated. To date, the trust has realized $36.6 million in losses, which have been contained to the nonrated Class G. As of the January 2025 remittance, only eight loans are remaining, all of which are in special servicing. Given the concentration of defaulted and under-performing assets, Morningstar DBRS' analysis considered liquidation scenarios for all nine remaining loans to determine the recoverability of the outstanding bonds. Morningstar DBRS' liquidated losses indicate increased likelihood of loss to Class F, prompting the downgrade of that class with today's credit rating action. In addition, Morningstar DBRS determined that even in a stressed scenario, Classes A-S, B, C, and D are well-insulated from loss and likely to be recovered, a key driver in changing the trend of those classes to Stable.

At the time of the last credit rating action, Morningstar DBRS had identified eight loans that demonstrated increased risk of maturity default, two of which successfully repaid. Furthermore, the two largest specially serviced loans in the pool, Fairview Park Drive (Prospectus ID#1, 32.5% of the pool) and Queens Atrium (Prospectus ID#2, 29.4% of the pool), have recently executed loan modifications to include maturity extensions. Morningstar DBRS notes the borrowers' commitment to the collateral properties is evidenced by the recent equity capital infusion and continued efforts towards stabilization of the assets that are expected to perform in line with expectations in the near to medium term.

Morningstar DBRS' loss expectations are primarily driven by the largest loan in the pool, Fairview Park Drive, which is secured by a 360,864-square-foot office building in Falls Church, Virginia. The loan transferred to the special servicer in May 2024 because of imminent monetary default and subsequently failed to repay at maturity in July 2024. According to the December 2024 remittance, a loan modification was executed in November 2024 and the loan is pending return to the master servicer. As per the terms of the loan modification agreement, the borrower is required to deposit $8.5 million into a general cash reserve account in exchange for a two-year maturity extension followed by a 12-month extension option, with a fully extended maturity date in July 2027. As per the December 2023 rent roll, the largest tenants include BAE Systems Inc. (47.0% of the NRA, lease expiry in June 2031), and Deloitte & Touche USA LLP (10.0% of the NRA, lease expiry in October 2025). Leases totalling 22.3% of the net rentable area (NRA) are scheduled to expire by the fully extended maturity date, including the second largest tenant. The servicer noted that the property was 86% occupied in September 2024, which remains in line with issuance expectations. An August 2024 appraisal valued the property at $91.1 million, 32.5% below the issuance appraised value of $135.0 million. While the execution of the modification agreement is a positive development, Morningstar DBRS remains concerned with the recent maturity default and moderate rollover risk prior to the extended maturity date. As such, the loan was analyzed with a liquidation scenario based on a haircut to the latest appraised value, resulting in an implied loss severity approaching 20%.

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 factor(s) 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.

Classes X-A, X-B, and X-C 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 (December 13, 2024), https://dbrs.morningstar.com/research/444617.

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

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 info-DBRS@morningstar.com.

The credit ratings were initiated at the request of the rated entity.

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

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

These are solicited credit ratings.

Morningstar DBRS notes that a sensitivity analysis was not performed for this review as the transaction is winding down, with only eight loans remaining. In such cases, Morningstar DBRS credit ratings are typically based on a recoverability analysis.

DBRS Limited
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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 (December 13, 2024), https://dbrs.morningstar.com/research/444616
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279 (July 17, 2023).

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