Rating Action: Moody's affirms nine classes of CGCMT 2014-GC21
Global Credit Research - 21 Aug 2020
Approximately $632 million of structured securities affected
New York, August 21, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on nine classes in Citigroup Commercial Mortgage Trust 2014-GC21, as follows:
Cl. A-4, Affirmed Aaa (sf); previously on May 16, 2019 Affirmed Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on May 16, 2019 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on May 16, 2019 Affirmed Aaa (sf)
Cl. A-AB, Affirmed Aaa (sf); previously on May 16, 2019 Affirmed Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on May 16, 2019 Affirmed Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on May 16, 2019 Affirmed A3 (sf)
Cl. PEZ**, Affirmed A1 (sf); previously on May 16, 2019 Affirmed A1 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on May 16, 2019 Affirmed Aaa (sf)
Cl. X-B*, Affirmed A2 (sf); previously on May 16, 2019 Affirmed A2 (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
The ratings on the P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges.
The ratings on the interest-only (IO) classes were affirmed based on the credit quality of the referenced classes.
The rating on exchangeable class, Cl. PEZ, was affirmed due to the credit quality of the referenced exchangeable classes.
The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. Moody's rating action reflects a base expected loss of 8.8% of the current pooled balance, compared to 6.4% at Moody's last review. Moody's base expected loss plus realized losses is now 7.3% of the original pooled balance, compared to 5.0% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except exchangeable classes and interest-only classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187. The principal methodology used in rating exchangeable classes was "Moody's Approach to Rating Repackaged Securities" published in June 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1230078. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Structured-Finance-Interest-Only-IO-Securities--PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *) and exchangeable classes (indicated by the **). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
As of the August 12, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 27% to $761 million from $1.04 billion at securitization. The certificates are collateralized by 58 mortgage loans ranging in size from less than 1% to 16% of the pool, with the top ten loans (excluding defeasance) constituting 51% of the pool. Four loans, constituting 3% of the pool, have defeased and are secured by US government securities. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 20, compared to 22 at Moody's last review. As of the August 12, 2020 remittance report, loans representing 84% were current or within their grace period on their debt service payments, 3% were beyond their grace period but less than 30 days delinquent, 3% were between 30 -- 59 days delinquent, 6% were 60 -- 89 days delinquent and 4% were greater than 90 days delinquent. Eleven loans, constituting 33% of the pool, are on the master servicer's watchlist, of which two loans, representing 7% of the pool, indicate the borrower has requested relief in relation to coronavirus impact on the property. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. One loan has been liquidated from the pool, resulting in an aggregate realized loss of $8.9 million (for an average loss severity of 54%). Three loans, constituting 5% of the pool, are currently in special servicing. One of the specially serviced loans, representing 2% of the pool, has transferred to special servicing since March 2020. The largest specially serviced loan is the Harbor Square loan ($15.7 million -- 2.1% of the pool), which is secured by a 345,000 square feet (SF) anchored retail center located in Egg Harbor, NJ. The loan transferred to special servicing in February 2020 due to imminent monetary default. Burlington Coat Factory (25% of net rentable area (NRA)) vacated at lease expiration in November 2019. Property performance has declined since securitization and the loan is due for the April 2020 payment. The second largest specially serviced loan is the 24 Hour Fitness loan ($11.6 million -- 1.5% of the pool), which is secured by a 47,000 SF retail facility located in Burbank, CA. The property was occupied by a single tenant, 24 Hour Fitness, which filed for bankruptcy in June 2020. The loan transferred to special servicing in June 2020 due to payment default. Legal counsel has been engaged to foreclose while continuing discussions with the borrower. The loan is due for the April 2020 payment. The third largest specially serviced loan is The Collegiate loan ($7.6 million -- 1.0% of the pool), which is secured by 8-story student housing multifamily building in Madison, WI. The loan transferred to special servicing in December 2019 due to the borrower filing Chapter 11 bankruptcy in November 2019. Litigation is ongoing between the borrower and lender, and the borrower is making partial payments while a possible settlement is being discussed. Moody's has also assumed a high default probability for three poorly performing loans, constituting 6% of the pool, and has estimated an aggregate loss of $23.7 million (a 29% expected loss on average) from these specially serviced and troubled loans. The largest troubled loan is secured by an anchored retail center located in Howell, NJ which has a low DSCR and has been impacted by declining occupancy. The second largest troubled loan is secured by a medical office located in Memphis, TN which has been impacted by declining occupancy and revenues combined with an increase in expenses. The third largest troubled loan is secured by a mixed-use portfolio (office and retail) located in Easton, MD which has a low DSCR and has been impacted by declining occupancy. Moody's received full year 2019 operating results for 97% of the pool, and partial year 2020 operating results for 68% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 111%, compared to 109% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 20% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 1.39X and 0.97X, respectively, compared to 1.41X and 0.98X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 28% of the pool balance. The largest loan is the Maine Mall Loan ($125.0 million -- 16.4% of the pool), which represents a pari-passu portion of a $235.0 million mortgage loan. The loan is secured by a 730,444 SF component of a 1.0 million SF super-regional mall located in South Portland, Maine. The Maine Mall was built in 1971 and renovated in 1983, 1989 and 1994. The mall contains three anchors, which include Macy's, J.C. Penney, and Best Buy, and two dark anchors, which include Sears and Bon-Ton. Macy's and Sears own their respective units and are not contributed as collateral for the loan. Bon-Ton was a former collateral anchor tenant at the mall and vacated their space in August 2017. The former Bon-Ton space has since been leased to Jordan's Furniture which was supposed to open for business in April 2020. However, the opening has been delayed as a result of the coronavirus outbreak. Sears has announced that they will close this location as part of their bankruptcy and is planning to close in September 2020. As of December 2019, the collateral portion was 76% leased compared to 82% in December 2018. The new lease with Jordan's Furniture will increase collateral occupancy to 91%. As of December 2019, the inline occupancy was 89% compared to 87% in December 2017. This loan is interest-only throughout the 10-year loan term. Moody's LTV and stressed DSCR are 137% and 0.75X, respectively, the same as at last review. The second largest loan is the 636 Greenwich Street Loan ($45.5 million -- 6.0% of the pool), which is secured by an eight-story transient hotel, used as student housing, located in New York, New York. The property is located within the West Village neighborhood of Manhattan in close proximity to New York University (NYU) and its main campus on 8th Street and University Place. The property contains 79 units that total 82,615 SF. NYU is the sole tenant at the property, leasing 100.0% of the space through August 2025. This loan is interest-only throughout the 10-year loan term. Moody's LTV and stressed DSCR are 117% and 0.76X, respectively, the same as at last review. The third largest loan is the Greene Town Center Loan ($43.0 million -- 5.7% of the pool), which represents a pari-passu portion of a $125 million mortgage loan. The loan is secured by a mixed-use property located in Beavercreek, Ohio, approximately ten miles southeast of the Dayton, Ohio CBD. The property is also encumbered by $37.4 million of mezzanine debt. The subject improvements primarily consist of a lifestyle center situated around a town square. In total, the property is comprised of 566,634 SF (80% NRA) of retail, 143,343 SF (20% NRA) of office, and 206 Class A multifamily units. Retail anchors include Von Maur (not part of the collateral), LA Fitness, Forever 21, Old Navy, Nordstrom Rack, and a 14-screen Cinemark Cinema (not part of the collateral). Parking is provided via three parking garages and four surface lots with 4,401 total spaces. The property was 90% leased as of March 2020, compared to 91% in December 2018 and 87% in September 2017. The borrower requested relief due to the coronavirus outbreak, and a forbearance is currently under review. The loan was last paid through April 2020. Moody's LTV and stressed DSCR are 107% and 0.96X, respectively, compared to 99% and 1.00X at Moody's last review.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004. The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Fred Kasimov Associate Lead Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Romina Padhi VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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