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WFRBS Commercial Mortgage Trust 2014-C20 -- Moody's affirms seven and downgrades two classes of WFRBS 2014-C20

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Rating Action: Moody's affirms seven and downgrades two classes of WFRBS 2014-C20Global Credit Research - 31 Mar 2021Approximately $745.1 million of structured securities affectedNew York, March 31, 2021 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on seven classes and downgraded the ratings on two classes in WFRBS Commercial Mortgage Trust 2014-C20 ("WFRBS 2014-C20") as follows:Cl. A-4, Affirmed Aaa (sf); previously on Oct 20, 2020 Affirmed Aaa (sf)Cl. A-5, Affirmed Aaa (sf); previously on Oct 20, 2020 Affirmed Aaa (sf)Cl. A-S, Affirmed Aaa (sf); previously on Oct 20, 2020 Affirmed Aaa (sf)Cl. A-SB, Affirmed Aaa (sf); previously on Oct 20, 2020 Affirmed Aaa (sf)Cl. A-SFL, Affirmed Aaa (sf); previously on Oct 20, 2020 Affirmed Aaa (sf)Cl. A-SFX, Affirmed Aaa (sf); previously on Oct 20, 2020 Affirmed Aaa (sf)Cl. B, Downgraded to A2 (sf); previously on Oct 20, 2020 Affirmed Aa3 (sf)Cl. C, Downgraded to Ba2 (sf); previously on Oct 20, 2020 Affirmed A3 (sf)Cl. X-A*, Affirmed Aaa (sf); previously on Oct 20, 2020 Affirmed Aaa (sf)* Reflects interest-only classesRATINGS RATIONALEThe ratings on six P&I classes were affirmed due to their significant credit support and 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 two P&I classes were downgraded due to a decline in pool performance driven primarily by higher anticipated losses from specially serviced and troubled loans. There are five specially serviced loans which represent 25% of the pool and three troubled loans which represent 6.5% of the pool. The largest specially serviced loan, the Woodbridge Center Loan (13.3% of the pool), had already experienced declining performance prior to 2020, and has been further impacted by the coronavirus pandemic. Furthermore, the loan has recognized a significant appraisal reduction of $77 million. The second largest specially serviced loan, the Sugar Creek I & II Loan (6.6% of the pool), is secured by a suburban office property in Texas that has been negatively impacted by the downturn in the oil markets. The remaining specially serviced and troubled loans are secured by retail and hotel loans which have exhibited recent declines in occupancy and performance.The rating on the IO class was affirmed based on the credit quality of the referenced classes.The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of commercial real estate from a gradual and unbalanced recovery in US economic activity. 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.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Moody's rating action reflects a base expected loss of 17.1% of the current pooled balance, compared to 9.2% at Moody's last review. Moody's base expected loss plus realized losses is now 12.6% of the original pooled balance, compared to 7.4% 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 RATINGSThe 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 ACTIONThe principal methodology used in rating all classes except interest-only classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. DEAL PERFORMANCEAs of the March 2021 distribution date, the transaction's aggregate certificate balance has decreased by 27% to $918 million from $1.25 billion at securitization. The certificates are collateralized by 82 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans (excluding defeasance) constituting 51% of the pool. Eleven loans, constituting 7.0% of the pool, have defeased and are secured by US government securities. The pool contains eleven low leverage cooperative loans, constituting 4.4% of the pool balance, that were too small to credit assess; however, have Moody's leverage that is consistent with other loans previously assigned an investment grade Structured Credit Assessments.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 21, compared to 23 at Moody's last review.As of the March 2021 remittance report, loans representing 75% were current or within their grace period on their debt service payments, 7% were between 30 -- 59 days delinquent and the remainder were either more than 90 days delinquent or in the foreclosure.Twenty-two loans, constituting 26% of the pool, are on the master servicer's watchlist. 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.No loans have been liquidated from the pool, however five loans, constituting 25.3% of the pool, are currently in special servicing. Four of the specially serviced loans, representing 24.9% of the pool, have transferred to special servicing since March 2020.The largest specially serviced loan is the Woodbridge Center Loan ($122.2 million -- 13.3% of the pool), which represents a pari-passu portion of a $234.9 million senior mortgage loan. The loan is secured by a 1.1 million square foot (SF) component of a two-story, regional mall in Woodbridge, New Jersey. The loan is sponsored and the property is managed by Brookfield Properties. The mall's anchors now include Macy's, Boscov's, JC Penney, and Dick's Sporting Goods. Two anchor spaces are currently vacant following the December 2019 closure of Lord and Taylor (120,000 SF) and the April 2020 closure of Sears (274,100 SF). Macy's, JC Penny and the former Lord & Taylor space are not included as collateral for the loan. Other major tenants include Boscov's, Dick's Sporting Goods and Dave & Busters. As of December 2020, the collateral was 69% leased, compared to overall 97% in December 2019 and 97% at securitization. The inline occupancy was 88% as of June 2020, compared to 85% in March 2019. Property performance had declined annually since 2015 and the 2019 net operating income (NOI) was nearly 17% lower than in 2014 with a 2019 NOI DSCR of 1.19X. Property performance further declined in 2020 with the 2020 NOI declining an additional 18% year over year and causing the NOI DSCR to decline below 1.00X. The property was closed temporarily during the coronavirus pandemic and re-opened in June. The loan transferred to special servicing in June 2020 due for imminent monetary default stemming from the impacts of the pandemic and the property's decline in performance. Furthermore, the property also faces significant competition with seven competitive regional and super regional centers located within a 20 miles radius of the property. The loan is last paid through its April 2020 payment date and the special servicer indicated they are dual tracking ligation options while continuing discussions with the borrower. The loan has amortized 6.2% since securitization after an initial 3 year interest only period, however, the property was recently appraised at a value significantly below the outstanding loan balance and the master servicer subsequently recognized an appraisal reduction of nearly 63% of the outstanding loan amount.The second largest specially serviced loan is the Sugar Creek I & II Loan ($61 million -- 6.6% of the pool), which is secured by two adjacent, eight-story office buildings totaling 409,168 SF located in Sugarland, Texas, 20 miles southwest of the Houston CBD. The asset is also encumbered with $8.6 million of mezzanine financing held outside the trust, which is currently in default. Both buildings are of Class-A quality. Sugar Creek-I was constructed in 2000 while Sugar Creek-II was completed in 2008. Collateral for the loan also includes a four-story 1,198-space parking garage in addition to 326 surface parking spaces. The largest tenant, Noble Drilling Services Inc. (originally 41% of the net rentable area (NRA)), reduced their space by 52,075 SF in January 2019 as part of their 10-year renewal. However, the company recently filed for Chapter 11 bankruptcy in July 2020. The loan transferred to special servicing in October 2020 for imminent monetary default. As of June 2020, the properties were 68% leased, compared to 67% at year-end 2019, and 93% in 2018.The third largest specially serviced loan is the Hilton DFW Lakes Hotel and Conference Center Loan ($40.7 million -- 4.4% of the pool), which is secured by a10-story full-service hotel located in Grapevine, Texas, approximately 3.7 miles north from Dallas Fort Worth airport. The hotel was originally built in 1983 and offers a 393-guestroom mix featuring 234 queen guestrooms, 151 king guestrooms and 8 suite guestrooms. As of the trailing twelve months (TTM) ending June 2020, the occupancy and RevPAR were 49.1% and $76 compared to 74.7% and $117 as of TTM ending June 2019. The loan transferred to special servicing in August 2020 due to imminent monetary default at borrower's request as a result of the coronavirus pandemic. The loan has amortized 11.3% since securitization.The remaining two specially serviced loans are secured by a hotel and retail property.Moody's has also assumed a high default probability for three poorly performing loans, constituting 6.5% of the pool, and has estimated an aggregate loss of $130 million (a 45% expected loss on average) from the specially serviced and troubled loans.The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV. As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan's amortization profile. The MLTV reported in this publication reflects the MLTV before the adjustments described in the methodology.Moody's received full year 2019 operating results for 94% of the pool, and full or partial year 2020 operating results for 86% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 103%, compared to 101% 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 19.7% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.1%.Moody's actual and stressed conduit DSCRs are 1.47X and 1.13X, respectively, compared to 1.48X and 1.15X 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 15.0% of the pool balance. The largest loan is the Worldgate Center Loan ($57.6 million -- 6.3% of the pool), which is secured by a 229,326 SF shopping center in Herndon, Virginia anchored by Worldgate Sport & Health and AMC, which is approximately 3 miles east of Dulles Airport. The collateral for the loan also includes a two-level subterranean parking garage and surface parking totaling 1,170 parking spaces. The property was developed in 1990 and is currently anchored by Worldgate Sport & Health flagship facility (108,670 SF) and AMC Worldgate 9 Theaters (38,238 SF).The movie theater was opened as of September 2020 with limited capacity. As of February 2021, the property was 95% leased to 29 tenants, compared to 98% at year-end 2020. The loan transferred to special servicing in June 2020 due to imminent monetary default stemming from the coronavirus impact on the property. However, the loan was returned from special servicing in August 2020 and was brought current in September 2020. The loan has paid down approximately 11.4% since securitization. Moody's LTV and stressed DSCR are 137% and 0.75X, respectively, compared to 121% and 0.85X at the last review.The second largest loan is the Rockwell -- ARINC HQ Loan ($47.2 million -- 5.1% of the pool), which is secured by three office buildings that are part of a six-building office complex located in Annapolis, Maryland. The collateral contains approximately 271,000 SF of NRA and is 100% triple-net leased to ARINC, a wholly owned subsidiary of Rockwell Collins, through March 2029. The lease does not contain any termination options and is fully guaranteed by Rockwell Collins. The loan has paid down approximately 2.8% since securitization. Moody's LTV and stressed DSCR are 107% and 1.19X, respectively, compared to 108% and 1.18X at the last review.The third largest loan is the Savoy Retail & 60th Street Residential Loan ($32.7 million -- 3.6% of the pool), which is secured by a mixed-use retail and residential development located on Third Avenue between 60th Street and 61st Street in New York, New York. The collateral includes the Savoy Retail Condo and the 60th Street Residential. The retail portion is comprised of approximately 36,000 SF of retail space and approximately 12,000 SF of subterranean garage containing 70 spaces. 60th Street Residential is comprised of four abutting 4-story walk-up residential buildings. As of June 2020, the total collateral was 82% leased, down from 87% at year-end 2019. The loan has paid down approximately 6.6% since securitization. Moody's LTV and stressed DSCR are 123% and 0.72X, respectively, compared to 124% and 0.71X at the last review.REGULATORY DISCLOSURESFor 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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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. Nicola Gomes Asst Vice President - 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 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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