NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 15 classes of Deutsche Bank Securities, Inc.'s COMM 2014-CCRE20 commercial mortgage trust pass-through certificates. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are based on the stable performance of the underlying collateral pool. As of the September 2016 distribution date, the pool's aggregate principal balance has been paid down by 1.5% to $1.17 billion from $1.18 billion at issuance. The pool has experienced no losses to date. De minimis interest shortfalls are currently affecting the non-rated class H. There are no delinquent or specially serviced loans. There are five loans on the servicer's watch list (5.7%). Two loans (7.5% of the pool) have been identified as Fitch Loans of Concern (FLOC's). The 10 largest loans represent 54.1% of the total pool balance, and the top three loans represent 27.2% of the total pool balance. In addition, nine loans secured by hotel properties account for 27.9% of the pool including five (24.5%) of the top-15 loans.
The largest FLOC is the Harwood Center loan (5.1% of the pool), the fourth largest loan in the pool. The loan is collateralized by a 36-story, 723,963-sf office building and a nine- story parking garage located in Dallas, TX. Per the year end (YE) 2015 OSAR, the property net operating income (NOI) has declined 21.5% compared to the issuer's underwritten NOI. According to the servicer, the decline is due to a 21% increase in operating expenses, driven by both general & administrative costs and janitorial expenses which that were not accounted for in the issuer's underwriting.
The loan is structured with a 10-year term and is interest only for the first three years. The NOI debt service coverage ratio (DSCR) reported at 1.61x for year to date (YTD) March 2016 and 1.54x for YE 2015, on an interest only basis. Amortization payments are scheduled to begin in August 2017. Based on amortized payments and the YE 2015 NOI, DSCR calculates to 1.18x, compared to 1.50x at issuance. The loan remains current as of the September 2016 payment date.
The second FLOC is the DoubleTree Beachwood loan (2.4%), which is collateralized by a 404-key full service hotel located in Beachwood, OH, approximately 10 miles east of Cleveland. The loan is on the servicer's watch-list due to low DSCR. According to the servicer, property performance has significantly declined since issuance due to increased competition from newer properties or recently renovated hotels. As a result occupancy, ADR, and RevPAR have all declined. Per the STR report for TTM June 2016, occupancy was 54%, with ADR at $105.85, and RevPAR at $57.14, compared to 61.7%, $105.11, and $64.85 at issuance. The property is well below the competitive set, which reported 70% occupancy, $116.27 ADR, and $81.34 RevPAR for TTM June 2016.
Per the servicers OSAR, the YE 2015 NOI was $1.2 million (or 39.5%) below the issuer's underwritten NOI. The decline is directly attributed to lower room revenues, as well as lower food & beverage for YE 2015. The NOI DSCR was 0.93x for YE 2015, compared to 1.53x at issuance. The interim YTD June 2016 DSCR was 1.02x. The loan remains current as of the September 2016 payment date.
The largest loan of the pool (10.3%) is secured by Gateway Center Phase II, a 602,164-sf retail power canter located in Brooklyn, NY. Per the March 2016 rent roll, the property is 100% occupied with a diverse mix of tenants with long- term leases. Leases for only 16.5% of the property net rentable area (NRA) expire prior to the loan's maturity in September 2024, with the majority rolling in 2024 (15.3% NRA). The largest tenants, JC Penney (20.3% NRA of the net rentable area [NRA]) and Shop Rite (14.9% NRA), have leases that mature in August 2034 - 10 years after the subject loan's maturity. At issuance, the property also had a 13-year lease with Sports Authority through January 2027. Sports Authority had filed for bankruptcy, and as a result vacated the property. In 2016, PC Richards purchased and assumed the subject lease through bankruptcy court and is expected to be open in the fourth quarter.
The property's revenues had improved 7.6% from the issuers underwriting, primarily due to higher reimbursement income and burning of rent concessions. The revenue improvement was offset
by higher real estate taxes for YE 2015 ($2.7 million) compared to issuance ($1.4 million). The real estate taxes at issuance were based on the borrower's budget and factored in a 15-year tax abatement. The servicer indicated that the filing for the exemption was completed in 2016, and should be reflected going forward. The NOI DSCR is stable, reporting at 1.75x for YE 2015, compared to 1.81x at issuance.
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.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following classes:
--$39.6 million class A-1 at 'AAAsf'; Outlook Stable;
--$99 million class A-2 at 'AAAsf'; Outlook Stable;
--$79.1 million class A-SB at 'AAAsf'; Outlook Stable;
--$275 million class A-3 at 'AAAsf'; Outlook Stable;
--$317.7 million class A-4 at 'AAAsf'; Outlook Stable;
--$873.9 million interest-only class X-A at 'AAAsf'; Outlook Stable;
--$63.6 million class A-M at 'AAAsf'; Outlook Stable;
--$57.7 million class B at 'AA+sf'; Outlook Stable;
--$199.6 million class PEZ at 'A-sf'; Outlook Stable;
--$78.3 million class C at 'A-sf'; Outlook Stable;
--$136 million interest-only class X-B at 'A-sf'; Outlook Stable;
--$60.6 million class D at 'BBB-sf'; Outlook Stable;
--$60.6 million interest-only class X-C at 'BBB-sf'; Outlook Stable;
--$26.6 million class E at 'BB-sf'; Outlook Stable;
--$11.8 million class F at 'B-sf'; Outlook Stable.
Fitch does not rate class G, class H, interest only class X-D, interest only class X-E, interest only class X-F and the interest-only class X-G certificates.
Class A-M, B and C certificates may be exchanged for class PEZ certificates, and class PEZ certificates may be exchanged for class A-M, B, and C certificates.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
COMM 2014-CCRE20 Mortgage Trust -- Appendix
Dodd-Frank Rating Information Disclosure Form
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