Morningstar DBRS Downgrades Credit Ratings on Four Classes of COMM 2014-CCRE14 Mortgage Trust

DBRS Limited (Morningstar DBRS) downgraded its credit ratings on four classes of Commercial Mortgage Pass-Through Certificates, Series 2014-CCRE14 issued by COMM 2014-CCRE14 Mortgage Trust as follows:

-- Class B to A (low) (sf) from AA (sf)
-- Class C to CCC (sf) from BBB (low) (sf)
-- Class PEZ to CCC (sf) from BBB (low) (sf)
-- Class D to C (sf) from CCC (sf)

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

-- Class E at C (sf)
-- Class F at C (sf)

The trend on Class B remains negative. Classes C, D, E, F, and PEZ have credit ratings that typically do not carry a trend in commercial mortgage-backed securities transactions.

The credit rating downgrades and Negative trend reflect Morningstar DBRS' recoverability expectations for the remaining loans in the pool, which is in wind down with just seven loans remaining. The largest contributor to the increased liquidated loss projections from Morningstar DBRS' previous credit rating action is the 175 West Jackson loan (Prospectus ID#8, 17.8% of the current pool balance), which has experienced precipitous value and occupancy declines from issuance. The Negative trend maintained on Class B reflects Morningstar DBRS' concerns regarding the accumulation of interest shortfalls, which have increased by approximately $2.5 million from the previous credit rating action as of the February 2025 remittance and continue to accumulate at a rate of approximately $260,000 per month. Of particular concern is the interest shortfalls that have affected Class C since November 2024 and are expected to remain outstanding beyond Morningstar DBRS' tolerance for shortfalls at the BBB (sf) credit rating categories, further supporting the credit rating downgrade for that bond.

As of the February 2025 remittance, with the pool reporting an aggregate principal balance of $201.2 million, representing a collateral reduction of 85.4% since issuance. Six of the seven remaining loans are specially serviced (52.7% of the pool), while the remaining loan, 625 Madison Avenue (Prospectus ID#1, 47.3% of the pool), is being monitored on the servicer's watchlist for an upcoming extended maturity date in December 2026. To date, the trust has realized $37.9 million in losses, which have been contained to the non-Morningstar DBRS credit rated Class G.

Given the concentration of defaulted and underperforming assets, Morningstar DBRS' analysis considered liquidation scenarios for all six specially serviced loans, based on conservative stresses to the most recent appraised values. Morningstar DBRS' projected liquidated losses total $71.8 million, a figure which would eliminate the remainder of Class G and the full balance of Classes F and E and erode a significant component of the Class D certificate. This scenario supports the C (sf) credit ratings for Classes D, E, and F, and the eroded credit support and increased shortfalls support the downgrade to CCC (sf) for Class C and to BBB (low) (sf) for Class B. While Morningstar DBRS considered stressed scenarios in the liquidation analyses, the high concentration of loans backed by office properties types suggest there could be significant volatility in the ultimate sale price for disposed assets given the impacts to investor demand in the post-pandemic environment.

The largest loan in the pool, 625 Madison (Prospectus ID#1, 47.3% of the pool), is a pari passu loan that is also secured in the COMM 2014-CCRE15 Mortgage Trust transaction (also credit rated by Morningstar DBRS). The loan is secured by the leased-fee interest in the land under 625 Madison Avenue, a 17-story Class A office tower in Manhattan. SL Green (SLG) was the ground-lease tenant and owned the improvements; however, following a default on a mezzanine loan secured by the subject borrower's interest in the property, SLG acquired the former sponsor's interest in the land. The senior loan was modified in December 2023 to terminate the ground lease, pre-approve an equity transfer in the land interest, and to extend the loan maturity to December 2026, with a $25.0 million principal paydown contributed to close the modification. Ross Related Companies (Related) was the equity interest transferee, and SLG and Related have spoken publicly about their plans to redevelop the subject property. A demolition contract was signed in August 2024 to demolish the improvements and construct a new tower that would include hotel, retail, and luxury condo space. Based on the November 2023 appraisal, the value of the land was reported at $415.1 million, an increase from the $400.0 million appraised land value at issuance, and well above the current whole-loan balance of $168.9 million (subject trust balance of $95.3 million). Given these developments and the estimated land value, Morningstar DBRS expects the loan will ultimately be fully recovered; however, given the uncertain timing for the takeout and the increase in shortfalls that could mean the servicer could ultimately withhold paid interest, the credit rating downgrade for the Class B certificate was supported.

The 175 West Jackson loan is secured by a 22-story, 1.54 million-square-foot (sf) office tower in Chicago's central business district. The loan failed to repay at its November 2023 maturity, and a receiver has been appointed; discussions are ongoing for a possible sale of the property. Occupancy has been depressed for the last several years with the trailing 12-month period ended September 30, 2024, financials reporting an occupancy rate of 58.0% and a debt service coverage ratio below breakeven. Reis reports an average vacancy rate of 20.4% for office properties located in the Central Loop submarket as of Q4 2024, compared with the Q4 2023 figure of 14.1%. The November 2024 appraisal reported a value of $84.0 million, a significant decline from the March 2024 value of $120.0 million, the issuance value of $410.0 million, and the whole-loan balance of $250.5 million. Given the significant value decline from the previous appraisal and soft office submarket, the loan was analyzed with a liquidation scenario based on a stressed 30.0% haircut to the November 2024 value, resulting in a total loss of $31.5 million, with a loss severity of 88.0%.

The 16530 Ventura Boulevard loan (Prospectus ID#20, 8.7% of the current pool balance) is secured by the Encino Atrium, a 157,000-sf suburban office building located in Encino, California. The loan transferred to special servicing as the borrower failed to pay off the loan at the January 2024 maturity. Although a resolution strategy has yet to be determined, the appointment of a receiver is underway. Occupancy has been depressed for the last several years with the March 2024 financials reporting an occupancy rate of 42.1% and negative cash flows, unchanged since 2021. In comparison, The SFV - Central submarket reported an average vacancy rate of 17.9% for Q4 2024, compared with 17.4% in Q4 2023, according to Reis. An appraisal dated September 2024 valued the property at $4.3 million, unchanged from the February 2024 appraised value but a significant decline from the issuance value of $30.0 million and the current loan balance of $17.4 million. Given Morningstar DBRS' expectation that the subject building will be quite difficult to sell considering the location and the very low occupancy rate, a stressed haircut of 50.0% was applied to the September 2024 appraised value in the liquidation scenario, which resulted in a loss severity approaching 100%.

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

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/448963

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, Morningstar DBRS notes that the credit ratings are sensitive to the recoverability assumptions on the seven 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.

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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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/North American CMBS Insight Model v 1.2.0.0 (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
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

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.