DBRS Morningstar Confirms All Ratings of Morgan Stanley Bank of America Merrill Lynch Trust 2014-C19

DBRS, Inc. (DBRS Morningstar) confirmed its ratings for all classes of Commercial Pass-Through Certificates, Series 2014-C19 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2014-C19 as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class X-C at A (sf)
-- Class C at A (low) (sf)
-- Class PST at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

Classes X-D, D, X-E, E, X-F, and F continue to carry Negative trends. All other classes have Stable trends.

The rating confirmations reflect the steady performance of the underlying collateral as the economy begins to recover from the impacts of the Coronavirus Disease (COVID-19) pandemic.

As of the December 2021 remittance, 63 of the original 77 loans remain in the pool, with a collateral reduction of 28.5% since issuance as a result of loan amortization, loan repayments, and the liquidation of two loans. Three loans, representing 1.7% of the current trust balance, have been fully defeased. There are six loans in special servicing (7.0% of the current pool balance). Since DBRS Morningstar’s last review of this transaction, two previously specially serviced loans, TownePlace Suites Vernal (Prospectus ID#43) and La Quinta Inn & Suites Broussard (Prospectus ID#57), were liquidated, resulting in a $4.9 million loss to the unrated Class G, while the Oriental Plaza and Villa Marina Portfolio loan (Prospectus ID#18) paid in full. There are also 18 loans (44.3% of the current pool balance) on the servicer’s watchlist.

The largest loan in special servicing, the PacStar Retail Portfolio (Prospectus ID#9, 4.0% of the pool), is secured by two anchored retail properties totaling 398,131 square feet (sf). The larger of the two properties, Yards Plaza, is a 259,137-sf shopping center located eight miles southwest of downtown Chicago. The property is anchored by Burlington Coat Factory, Ralph's Grocery Company, and Forman Mills. Other notable tenants include Planet Fitness and Dollar Tree. The smaller property, Willowbrook Court Shopping Center, is a 137,650-sf shopping center located within a congested retail corridor of northwest Houston (24 miles from downtown). The property is located directly across from the Willowbrook Mall.

The loan transferred to special servicing in September 2021 as a result of imminent monetary default. Per the most recent servicing commentary, the special servicer intends to proceed with the appointment of a receiver and foreclosure on the properties. Yards Plaza has maintained stable performance to date as the property was 98% occupied while occupancy at Willowbrook Court Shopping Center is quite low at 28%, which is largely attributed to the departure of Toys “R” Us in 2018. The decrease in occupancy has resulted in a below breakeven debt service coverage ratio (DSCR) since 2019. As of year-end (YE) 2020, the loan had a DSCR of 0.57 times (x) as net cash flow (NCF) has decreased 58% compared with issuance. The portfolio’s combined occupancy was reported at 74% as of June 2021. At issuance, the loan had an appraisal value of $69.6 million, which implies a loan-to-value ratio (LTV) of 74%. This loan was analyzed with a significantly increased probability of default for this review.

The largest loan on the servicer’s watchlist, Linc LIC (Prospectus ID#5, 13.8% of the pool), is secured by the borrower's fee-simple interest in a 709-unit high-rise multifamily property in Long Island City, New York. The building is a 42-story luxury apartment building with a unit mix consisting of 25% studios, 55% one bedrooms, 17% two bedrooms, and 3% three-bedrooms. The property also has a small retail component of 15,952 sf and the vast majority of the space is leased to Foodcellar & Co. The loan continues to be monitored on the servicer’s watchlist for occupancy concerns as the YE2020 occupancy decreased to 61%. Since then, occupancy has improved to 72.3% as of June 2021. Despite the improvement, the property’s annualized EGI at mid-year 2021 was down 26.8% when compared with YE2020. YE2020 NCF was 11.5% below issuance levels while covering at a DSCR of 1.13x.

While not on the watchlist, we also have concerns with the 300 North LaSalle loan (Prospectus ID#2; 10.7%) after the Chicago Sun-Times reported in August 2021 that the property’s largest tenant, Kirkland & Ellis, which represents 50.9% of the property’s net rentable area (NRA), will exercise an early termination option and vacate the property prior to its 2029 lease expiration. Kirkland & Ellis has the right to terminate its lease effective February 2025 with 24-month notice. In addition, the Real Deal reported in December 2021 that the property’s second-largest tenant, Boston Consultant Group, which leases 11.4% of the NRA, will also vacate upon its December 2024 lease expiration. According to that article, the firm is expected to lease 200,000 sf at a proposed office building at 360 North Green Street. The loss of both tenants would decrease occupancy to 34%. Mitigating these concerns is that Kirland & Ellis is required to pay a termination fee equal to 12 months of net rent plus its pro rata share of taxes and operating expenses. We don’t anticipate any near-term concerns as both leases have another two to three years remaining; however, the departure could increase the loan’s maturity risk should the sponsor be unable to back-fill the space. While the whole loan balance includes $244.4 million of subordinate debt held outside the trust, the trust debt was leveraged to only 27.1% at issuance. Despite the upcoming rollover, DBRS Morningstar confirmed the current performance of the loan remains consistent with investment-grade loan characteristics with an occupancy rate of 96% and a DSCR of 1.66x as of YE2020.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, X-C, X-D, X-E, and X-F are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#9 - PacStar Retail Portfolio (4.0% of the pool)
-- Prospectus ID#5 – Linc LIC (13.8% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277