NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 17 classes of WFRBS Commercial Mortgage Trust 2014-LC14 commercial mortgage pass-through certificates. The Rating Outlook for all classes remains Stable. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are due to the overall stable performance of the collateral pool since issuance. The remittance report dated Jan. 15, 2016 indicates one loan, Canadian Pacific Plaza (3.2%, #8 loan by balance), as over 30 days delinquent. However, it has been confirmed by the master servicer, Wells Fargo, that the loan is now current. As of the January 2016 distribution date, the pool's aggregate principal balance has been reduced by 1.8% to $1,232.1 million from $1.225.6 million at issuance. There are eight servicer watchlist loans (10.2% of the pool), three of which (5.2%) have been identified as Fitch Loans of Concern (FLOC). No loans have been in special servicing since issuance.
The first FLOC is the Williams Center Towers loan (3.7%), a 10-year partial interest only (IO) loan (IO for the initial 38 months). It is secured by two adjacent office buildings totalling 765,809 sf located in the central business district of Tulsa, OK. The largest tenants at issuance included Samson Investment Co (34.7% NRA), Bank of Oklahoma (6.7%), and Doerner, Saunders, Daniel LLP (6.4%).
The loan was structured with a springing cash management agreement, which was triggered when Sampson Investment, an energy exploration company, gave back the 11th floor consisting of 19,857 SF effective Aug. 1, 2015. Samson has also given notice that it will be giving back the 12th floor consisting of 19,464 square feet (sf) (2.5%) effective Aug. 1, 2016, which is permitted per the original lease terms, which include termination options. In September 2015, the company filed for bankruptcy due to the fallout of the oil industry. However, the expected further decline in occupancy by Sampson Investment has been buffered by another tenant, BOKF, which expanded their space from 70,000 sf to a total of 88,829 sf effective October 2015. Overall, tenants comprising 58% of NRA have termination options, including the top three largest tenants.
As of September 2015, Williams Center Towers was 89% occupied, compared to 92% at YE 2014 and 91.6% at issuance. The servicer-reported third quarter 2015 (3Q15) DSCR was 1.92x, compared to 1.79x at YE2014 and 1.65x at issuance.
The second FLOC is the Westridge Apartments loan (1%). The loan is secured by a 96-unit multifamily property located in Williston, ND. The property's occupancy has dropped significantly from 100% at issuance to 66% as of September 2015. The servicer-reported 2Q15 DSCR was 1.60x, compared to 2.02x at YE2014 and 1.91x at issuance.
The largest loan in the pool, Americas Mart (10.9% of the pool), is a 10-year amortizing balloon loan. The whole loan consists of four pari passu notes with a total current balance of $537.8 million, amortizing from $560 million at issuance. Only the A3 note is included in the trust. The loan is secured by a 7.1 million sf wholesale trade market located in the CBD of Atlanta, GA, that caters to a variety of retailers, wholesalers and manufacturers that engage in wholesale trade. There is approximately 4.6 million sf of rentable area in four attached buildings, 3.5 million sf of which is permanent space. The 1.1 million sf of temporary exhibition space can be leased during trade shows. The loan is sponsored by AMC Inc. The servicer-reported occupancy for the permanent space as of May 2015 was 90%, compared to 85% at UW. The loan is performing in line with issuer underwriting expectations. The servicer-reported DSCR as of May 2015 was 1.77x, compared to 1.76x at issuance.
The second largest loan, The PennCap Portfolio (7%), is a 10-year partial interest-only loan (interest-only for the initial 24 months). The whole loan consists of two pari passu notes totaling $138.6 million. Only the A1 note is included in the trust. The collateral consists of a portfolio of 32 properties located within five different office/industrial parks in the Lehigh Valley area of Pennsylvania. The combined properties represent 1,432,661 sf of office and office/industrial flex space. The properties are currently occupied by over 100 tenants across a wide variety of industries. Sponsored by PennCap Properties, the loan is performing in line with issuer underwriting expectations. As of September 2015, the portfolio was 92% occupied, compared to 91.3% at UW. Servicer reported 3Q 2015 DSCR was 1.76x, compared to 1.54x at issuance.
RATING SENSITIVITIES
The Rating Outlook for all classes remains Stable. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset-level event changes the transaction's portfolio-level metrics.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following classes:
--$42.7 million class A-1 at 'AAAsf'; Outlook Stable;
--$189.7 million class A-2 at 'AAAsf'; Outlook Stable;
--$80 million class A-3FL at 'AAAsf'; Outlook Stable;
--$0 class A-3FX at 'AAAsf'; Outlook Stable;
--$175 million class A-4 at 'AAAsf'; Outlook Stable;
--$278.5 million class A-5 at 'AAAsf'; Outlook Stable;
--$89.5 million class A-SB at 'AAAsf'; Outlook Stable;
--$95.7 million class A-S at 'AAAsf'; Outlook Stable;
--$81.6 million class B at 'AA-sf'; Outlook Stable;
--$47.1 million class C at 'A-sf'; Outlook Stable;
--$ 0 class PEX Exchangeable Certificates at 'A-sf'; Outlook Stable;
---$64.3 million class D at 'BBB-sf'; Outlook Stable;
--$22 million class E at 'BBsf'; Outlook Stable;
--$12.6 million class F at 'Bsf'; Outlook Stable;
--Interest-Only class X-A at 'AAAsf'; Outlook Stable;
--Interest-Only class X-B at 'BBB-sf'; Outlook Stable.
Fitch does not rate the IO class X-C or the class G.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395
Related Research
Wells Fargo Commercial Mortgage Trust Series 2014-LC14 -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738198
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998998
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998998
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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