Rating Action: Moody's affirms twelve classes and downgrades one class of COMM 2014-CCRE15
Global Credit Research - 30 Jul 2020
Approximately $685 million of structured securities affected
New York, July 30, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on twelve classes and downgraded the rating on one class in COMM 2014-CCRE15 Mortgage Trust as follows:
Cl. A-2, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Nov 30, 2018 Affirmed Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Nov 30, 2018 Affirmed A3 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Nov 30, 2018 Affirmed Baa3 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Nov 30, 2018 Affirmed Ba2 (sf)
Cl. F, Downgraded to B3 (sf); previously on Nov 30, 2018 Affirmed B2 (sf)
Cl. PEZ**, Affirmed A1 (sf); previously on Nov 30, 2018 Affirmed A1 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)
Cl. X-B*, Affirmed Baa1 (sf); previously on Nov 30, 2018 Affirmed Baa1 (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
The ratings on nine principal and interest (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 rating on one P&I class was downgraded due to higher realized and anticipated losses from specially serviced and troubled loans.
The ratings on two interest-only (IO) classes, Class X-A and Class X-B were affirmed based on the credit quality of the referenced classes.
The rating on the exchangeable class, Class 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 4.2% of the current pooled balance, compared to 2.2% at Moody's last review. Moody's base expected loss plus realized losses is now 4.4% of the original pooled balance, compared to 3.2% 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 methodologies used in rating all classes except exchangeable classes and 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 Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875. 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, "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875, 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 July 10, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 29% to $719.0 million from $1.0 billion at securitization. The certificates are collateralized by 34 mortgage loans ranging in size from less than 1% to 14.8% of the pool, with the top ten loans (excluding defeasance) constituting 69.7% of the pool. One loan, constituting 11.8% of the pool, has an investment-grade structured credit assessment. Six loans, constituting 10.0% 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 12, the same as at Moody's last review. As of the July 2020 remittance report, loans representing 89% were current or within their grace period on their debt service payments, 1% were beyond their grace period but less than 30 days delinquent, 6% were between 60 -- 89 days delinquent, and 4% were 90 days or more delinquent. Eleven loans, constituting 30% of the pool, are on the master servicer's watchlist, of which six loans, representing 13% 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. Two loans have been liquidated from the pool, resulting in an aggregate realized loss of $13.5 million (for an average loss severity of 61%). Three loans, constituting 5% of the pool, are currently in special servicing. All of the specially serviced loans have transferred to special servicing since March 2020. The largest specially serviced loan is the River Falls Shopping Center Loan ($16.1 million -- 2.2% of the pool), which is secured by an approximately 288,000 square feet (SF) portion of an 873,000 SF retail center located in Clarksville, Indiana. The property was originally constructed in 1990 as an indoor regional mall, redeveloped into a power center in 2005, and was renovated in 2013. The three largest tenants are Old Time Pottery (30% of net rentable area (NRA)), Dick's Sporting Goods (17% of NRA), and Gordmans (17% of NRA). Old Time Pottery and Stage Stores (the parent company of Gordmans) have recently filed for Chapter 11 bankruptcy. As of March 2020, the property was 100% occupied. The borrower requested relief due to the coronavirus outbreak and the loan was transferred to special servicing in May 2020 for imminent monetary default at the borrower's request. The loan was last paid through its April 2020 payment. The second largest specially serviced loan is the Hilton Garden Inn Springfield OR Loan ($12.6 million -- 1.8% of the pool), which is secured by 149-room, five-story, select-service hotel located in Springfield, Oregon. The property is located at the intersection of Interstate 5 and Highway 569, and less than a mile from the PeaceHealth Sacred Heart Medical Center at Riverbend. The borrower requested relief due to the coronavirus outbreak in May 2020 and the loan was transferred to special servicing in June 2020 for imminent monetary default at the borrower's request. The loan was last paid through its March 2020 payment. The third largest specially serviced loan is the Wyndham Hotel Oklahoma City Loan ($7.3 million -- 1.0% of the pool), which is secured by a 244-room, two-story, select-service hotel located in Oklahoma City, Oklahoma, approximately five miles from downtown Oklahoma City and two miles from Will Rogers World Airport. The loan has been on the watchlist since November 2017 due to low DSCR. The NCF DSCR has been below 1.00X since 2016. The loan was transferred to special servicing in April 2020 for imminent monetary default and the borrower has indicated their intention of transitioning the property to the lender. The loan was last paid through its March 2020 payment and went into foreclosure status in May 2020. Moody's has also assumed a high default probability for two poorly performing loans, constituting 3.7% of the pool, and has estimated an aggregate loss of $13.3 million (a 27% expected loss on average) from these specially serviced and troubled loans. The largest troubled loan is the Best Western Plus Hawthorne Terrace Loan ($15.2 million -- 2.1% of the pool), which is secured by an 83-room, limited-service hotel located in Chicago, Illinois. The 2019 NOI declined approximately 28% from 2018 and was 23% lower than in 2014. The loan has been on the watchlist since May 2020 for borrower relief request and was last paid through its April 2020 payment. The second largest troubled loan is the Homewood Suites Lafayette LA Loan ($11.7 million -- 1.6% of the pool), which is secured by a 129-room, extended-stay hotel located in Lafayette, Louisiana. Property performance has been declining since 2014 as a result of decreased revenue. A mandated franchise renovation was completed in late 2019 which impacted occupancy in its duration. A cash trap was active in January 2020 due to the NCF DCSR dropping below 1.20X. The loan has been on the watchlist since June 2020 for borrower relief request and is current through its July 2020 payment. Moody's received full year 2019 operating results for 100% of the pool, and partial year 2020 operating results for 55% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 109%, compared to 106% 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 15% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.4%.
Moody's actual and stressed conduit DSCRs are 1.29X and 0.96X, respectively, compared to 1.39X and 0.99X 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 loan with a structured credit assessment is the 625 Madison Avenue Loan ($84.9 million -- 11.8% of the pool), which represents a pari-passu portion of a $194.8 million mortgage loan. The property was also encumbered by a $195.0 million mezzanine debt at closing. The loan is secured by the fee interest in a 0.81-acre parcel of land located at 625 Madison Avenue between East 58th and East 59th Street in New York City, New York. The fee interest is subject to a ground lease pursuant to which the ground tenant constructed, developed and owns the improvements and the ground lease payment is expected to reset in June 2022. The non-collateral improvements consist of a 17-story, mixed-use building with approximately 38,000 SF of ground and second floor retail space and approximately 525,000 SF of office space. The loan was structured with an anticipated repayment date (ARD) in December 2018 and has final maturity date in December 2026. Moody's structured credit assessment is aa2 (sca.pd). The top three conduit loans represent 36.0% of the pool balance. The largest loan is the Google and Amazon Office Portfolio Loan ($106.3 million -- 14.8% of the pool), which represents a pari-passu portion of a $436.9 million mortgage loan. The property was also encumbered by a $67.8 million mezzanine debt at closing. The loan is secured by an office portfolio totaling approximately 1.1 million SF located in Sunnyvale, California. The Google campus consists of four, four-story Class A office buildings (Technology Corners Property) totaling approximately 700,000 SF, with is a part of a larger 949,000 SF office campus known as Technology Corners. The A2Z Development (subsidiary of Amazon) leases an approximately 357,000 SF, eight-story, Class A office building (Moffett Towers Building D), is part of a larger 2.0 million SF campus known as the Moffett Towers. A2Z Development uses its space for design and product development for the Kindle e-reader. Both tenants have lease expirations in 2024. After an initial 48-month interest-only period, the loan has amortized 3.4% since securitization. Moody's LTV and stressed DSCR are 108% and 0.94X, respectively, compared to 111% and 0.92X at the last review. The second largest loan is the AMC Portfolio Pool I Loan ($84.1 million -- 11.7% of the pool), which is secured by seven manufactured housing communities across Texas and Michigan. The communities were built between 1968 and 1998 and contain 2,004 pads in total. Texas accounts for the largest concentration in the portfolio with three communities located in the Austin MSA and two in the Fort Worth MSA for a total of 1,637 pads. As of March 2020, the portfolio was 97% occupied compared to 92% in June 2018 and 94% at securitization. After an initial 47-month interest-only period, the loan has amortized 3.8% since securitization. Moody's LTV and stressed DSCR are 114% and 0.84X, respectively, compared to 117% and 0.82X at the last review. The third largest loan is the 25 West 45th Street Loan ($68.5 million -- 9.5% of the pool), which is secured by an approximately 185,000 SF, 17-story, Class-B, office building located on West 45th street between 5th Avenue and 6th Avenue in New York City, New York. The ground floor consists of approximately 16,500 SF of retail space. The largest tenant, WeWork (13% of NRA), sign two 15-year leases at the property in 2019 with rent commencing in the second quarter of 2020. The second largest tenant, Crossover Health Management (8% of NRA), has a lease expiration in 2029 with rent expected to commence in the second quarter of 2020. As of March 2020, the property was 87% occupied compared to 72% in 2018 and 95% at securitization. The loan has been on the watchlist since November 2019 for low DSCR and decrease in occupancy. In 2018, Tenants Broadway Video Group (5% of NRA) vacated at lease expiration and Turnaround for Children, downsized their presence at the building from 9% of NRA to 6% of NRA. After an initial 60-month interest-only period, the loan has amortized 2.2% since securitization. Moody's LTV and stressed DSCR are 137% and 0.71X, respectively, compared to 122% and 0.80X at the 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.
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Amy Wang 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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