Morningstar DBRS Downgrades Credit Rating on One Class of COMM 2014-LC15 Mortgage Trust

DBRS Limited (Morningstar DBRS) downgraded its credit rating on one class of Commercial Mortgage Pass-Through Certificates, Series 2014-LC15 issued by COMM 2014-LC15 Mortgage Trust as follows:

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

In addition, Morningstar DBRS confirmed its credit ratings on the following classes:

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

Morningstar DBRS maintained Negative trends on Class D and Class X-B. The remaining classes have credit ratings that do not typically carry a trend in commercial mortgage-backed securities (CMBS) credit ratings.

The credit rating downgrade and Negative trends reflect Morningstar DBRS' loss projections for the remaining loans in the pool, as well as the adverse selection risk for this transaction that has wound down to just four remaining non-defeased loans, all of which are in default and with the special servicer. Based on the liquidation scenarios considered for each of the remaining loans with this review, Morningstar DBRS' liquidated losses for the pool have increased by approximately $3.0 million compared with the amount considered with the prior credit rating action. In addition, cumulative interest shortfalls totaling $3.8 million as of the December 2024 reporting have also affected Classes E, F, and the nonrated Class G. Morningstar DBRS does not anticipate those shortfalls will be recovered.

The largest contributor to Morningstar DBRS' cumulative projected liquidated loss amount of $12.1 million is the largest remaining loan in the pool, 100 Westminster (Prospectus ID#7, 61.6% of the current pool balance), backed by a 361,462-square foot office property located in Providence, Rhode Island, as further described below. The liquidated losses are expected to erode the remainder of Class G, which has already been reduced by a little over $31.0 million because of realized losses to date, and almost all the Class F balance of $11.6 million. Morningstar DBRS expects the Class D certificate will ultimately be repaid in full, supporting the credit rating confirmation. However, the concentration of defaulted loans is a significant risk for the transaction. This factor, combined with the possibility of further volatility in the collateral values and related liquidation scenarios, means the CCC (sf) credit rating for the Class E certificate and the Negative trend for Class D are supported.

Since the previous credit rating action in February 2024, 14 loans have successfully repaid in full. The trust balance of $62.0 million as of the December 2024 remittance reflects a collateral reduction of 93.3% since issuance. There are two small loans, collectively representing 5.8% of the pool balance, that are fully defeased.

The 100 Westminster loan was transferred to special servicing in August 2023 and a maturity extension to February 2025 with a one-year extension option was ultimately granted. The servicer has confirmed the loan has met the terms for the one-year extension option which has been approved. The property's performance declined following the loss of the former largest tenant, Bank of America (20.1% of net rentable area), at lease expiry in April 2023. Two tenants have since taken some of that space and the servicer most recently reported an occupancy rate of 76.8% as of June 2024, down from 91.8% at issuance. An updated appraisal dated October 2024 estimated an as-is value for the property of $39.6 million, a 39.4% decline from the issuance appraised value of $65.3 million. Morningstar DBRS analyzed the loan with a liquidation scenario based on a 15% haircut to that value, resulting in an implied loss severity of 21.0%.

The second-largest loan in the pool is the Moss-Bauer Apartments loan (Prospectus ID#24, 13.0% of the pool), which is secured by a 28-unit multifamily building in the central business district of New Orleans. The loan transferred to the special servicer in March 2018 as the borrower was not compliant with cash management provisions. A modification agreement temporarily brought the loan current, but it has been in default since October 2023. A receiver has been appointed and is currently evaluating the property's needs while the special servicer is working with borrower to negotiate the payment of the limited guaranty that was granted as part of the prior loan modification. An updated appraisal was provided in November 2024, valuing the property at $7.8 million, below the July 2023 appraised value of $8.3 million and the issuance appraisal of $11.6 million. With this review, Morningstar DBRS analyzed the loan with a liquidation scenario based on a 10% haircut to the November 2024 value, resulting in a loss severity in excess of 35.0%.

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 at (August 13, 2024; https://dbrs.morningstar.com/research/437781).

Class X-B is an interest-only (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 (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 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, the credit ratings are sensitive to the recoverability assumptions of the remaining loans in the transaction. Should the recoverability of the remaining loans be lower than that implied by the stressed values in the latest analysis, credit ratings would be negatively impacted.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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 03, 2024) https://dbrs.morningstar.com/research/444064

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024) https://dbrs.morningstar.com/research/438283

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.