NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks to the Morgan Stanley Bank of America Merrill Lynch Trust Series 2014-C18 commercial mortgage pass-through certificates:
--$67,400,000a class 300-A 'AA-sf'; Outlook Stable;
--$39,000,000a class 300-B 'A-sf'; Outlook Stable;
--$57,000,000a class 300-C 'BBB-sf'; Outlook Stable;
--$49,000,000a class 300-D 'BB-sf'; Outlook Stable;
--$32,000,000a class 300-E 'Bsf'; Outlook Stable.
(a) Privately placed pursuant to rule 144A.
Fitch does not rate any other classes issued by Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C18.
Although not publically rated herein, on a stand-alone basis, the $230.6 million 300 North LaSalle A notes (consisting of the pooled A-1 note, nonpooled A-2 note and nonpooled A-3 note) have credit characteristics consistent with Fitch's 'AAAsf' ratings.
Morgan Stanley Bank of America Merrill Lynch Trust series 2014-C18 (MSBAM 2014-C18), is a CMBS fusion transaction collateralized by 65 loans and 100 properties. Fitch has only issued ratings for the 300 North LaSalle B Note (300N Rake) certificates issued by MSBAM 2014-C18. These certificates are subordinate in right of payment of interest and principal to the 300 North LaSalle A notes and derive their cash flow solely from the 300 North LaSalle Street loan. The 300N Rake certificates are generally not subject to losses from any of the other loans collateralizing the MSBAM 2014-C18 transaction. No other classes issued by MSBAM 2014-C18 are rated by Fitch.
The 300 North LaSalle certificates represent the beneficial interests in the mortgage loan securing the fee interest in the 300 North LaSalle Street office property in Chicago, IL. Proceeds of the loan, along with $381 million in borrower equity, were used by an affiliate of The Irvine Company LLC (Irvine) to acquire the property in July 2014 for a total cost of $850 million ($652 per square foot [psf]), as well as fund closing costs and escrows. The certificates will follow a sequential-pay structure.
KEY RATING DRIVERS
Asset Quality and Market Positioning: Newly constructed in 2009, 300 North LaSalle is a 60-story, class A, LEED Platinum central business district (CBD) office building. The property is located along the north bank of the Chicago River in the River North neighborhood and features high-quality amenities. 300 North LaSalle is considered by Fitch as one of the premier buildings in the city of Chicago. Fitch assigned the subject a property quality grade of 'A'.
Institutional-Quality Tenants on Long-Term Leases: The property is currently 98.1% leased to a set of nationally recognized and institutional-quality tenants. In-place leases have an average of 11 years remaining. The building's four largest tenants have lease expirations occurring in 2024 or later - Kirkland & Ellis LLP (Kirkland; 52.8% of total NRA; expiry 2029), The Boston Consulting Group (BCG; 9.5%; 2024), Quarles and Brady LLP (Quarles; 6.3%; 2024) and GTCR Golder Rauner (GTCR; 6.3%; 2024).
High Fitch Leverage: The $475 million whole loan has a Fitch debt service coverage ratio (DSCR) and loan to value (LTV) of 1.00x and 89.0%, respectively, and total debt of $365 psf. The property was recently acquired for a total cost of $850 million ($652 psf), implying a loan-to-cost ratio of 55.9%. Furthermore, the 10-year loan is structured with five years of amortization (on a 30-year schedule), resulting in a scheduled 9.6% reduction to the original loan balance.
Experienced Sponsorship: Irvine dates its history back to 1864 and the Irvine Ranch. Since then, the company has grown into the largest owner and manager of commercial real estate in California. The company's portfolio includes 497 office buildings, 111 multifamily properties, 41 retail properties and three resort properties in Orange County, San Diego, Los Angeles and Silicon Valley, CA. Irvine also owns the Hyatt Center, a class A office property located in Chicago, IL.
Fitch performed a break-even analysis to determine the amount of value deterioration the loan could withstand prior to $1 of loss on the total debt and 'AA-sf' rated class. The break-even value declines were performed using both the appraisal values at issuance and the Fitch-stressed value.
Based on the appraisal value of $851 million, break-even values represent declines of 44.2% and 65.0% for the whole loan and 'AA-sf' notes, respectively.
Fitch evaluated the sensitivity of the ratings for class 300-A (rated 'AA-sf') and found that a 9% decline in Fitch net cash flow (NCF) would result in a one-category downgrade, while a 25% decline would result in a downgrade to below investment grade.
The Rating Sensitivities section in the presale report includes a detailed explanation of additional stresses and sensitivities. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 2014);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (September 2014);
--'Counterparty Criteria for Structured Finance Transactions and Covered Bonds' (May 2014);
--'U.S. Commercial Mortgage Servicer Rating Criteria' (February 2014).
--'Morgan Stanley Bank of America Merrill Lynch Trust Series 2014-C18 - Appendix
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C18 - Appendix
U.S. Commercial Mortgage Servicer Rating Criteria ￢ﾀﾓ Effective Sept. 10, 2010 to Feb. 18, 2011
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions