DBRS Morningstar Confirms All Classes of WFRBS Commercial Mortgage Trust 2014-LC14, Changes Trends on Two Classes

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-LC14 issued by WFRBS Commercial Mortgage Trust 2014-LC14 as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class X-B at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-C at B (high) (sf)
-- Class F at B (sf)

The rating confirmations reflect the overall stable performance of the transaction, which continues to perform within DBRS Morningstar’s expectations. At issuance, the trust comprised 71 fixed-rate loans secured by 144 commercial and multifamily properties with a trust balance of $1.26 billion. Per the January 2022 remittance, 60 loans secured by 125 properties remain in the trust with a total trust balance of $849.6 million, representing a 32.3% collateral reduction since issuance.

In conjunction with the rating confirmations, the trends on Classes D and X-B were changed to Stable from Negative as loan performance continues to restabilize toward pre-pandemic levels. Three of the five specially serviced loans, totaling 2.2% of the trust balance, are secured by hospitality assets. In general, this property type has experienced a faster rebound as pandemic mitigation efforts have eased and travel has resumed. Forbearance agreements were recently executed for these loans and the special servicer anticipates they will be brought current and transferred back to the master servicer in the near term. Since the last rating action, there has also been an increase in defeased collateral, which now represents 19.2% of the pool.

DBRS Morningstar maintained the Negative trends on Classes E, F, and X-C given ongoing concerns for the Williams Center Tower (Prospectus ID#6; 5.0% of the trust balance), Canadian Pacific Plaza (Prospectus ID#8; 5.0% of the trust balance), and West Side Mall (Prospectus ID#14; 2.8% of the trust balance) loans. All other trends remain Stable.

The largest specially serviced loan is Williams Center Towers, which is secured by a Class A high-rise office property in the central business district (CBD) of Tulsa, Oklahoma. The loan transferred to special servicing in April 2018 shortly after the property’s second-largest tenant vacated after filing bankruptcy, which caused occupancy to decline to 78.0%. Occupancy further declined to its current level of 67.1% following the departure of Bank of Oklahoma in December 2019. Despite its prolonged time in special servicing, the loan remains current and in cash management. DBRS Morningstar anticipates the loan will remain with the special servicer until there is material leasing activity.

The second-largest specially serviced loan, West Side Mall, is secured by an anchored community shopping center in Edwardsville, Pennsylvania. The loan has historically experienced fluctuations in occupancy and transferred to the special servicer in June 2021 at the borrower’s request as a result of the coronavirus pandemic. The August 2021 servicer site inspection noted significant deferred maintenance. No new major leases have been executed since 2018 and the collateral is in need of considerable capital improvements. Despite this, the annualized Q2 2021 net cash flow is up 29% over the YE2019 figure because of increased reimbursements. DBRS Morningstar remains concerned about the property’s condition and lack of clear leasing strategy.

Canadian Pacific Plaza is secured by a 28-story, Class B building in the CBD of Minneapolis, and has been on the servicer’s watchlist since June 2020 following the departure of the property’s second-largest tenant at lease expiration in February 2020, causing a drop in occupancy. As of November 2021, the property remains 63.1% occupied. Additionally, Soo Line Railroad Company, the largest tenant and currently occupying 23.4% of the net rentable area, announced it will be moving its headquarters to Kansas City following the parent company’s merger with Kansas City Southern. The lease extends three years beyond the loan term and is guaranteed by an investment-grade entity, Canadian Pacific Railway. Near-term cash flow is expected to remain stable; however, refinance risk is elevated.

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, and X-C 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#6 – Williams Center Towers (5.0% of the pool)
-- Prospectus ID#14 – West Side Mall (2.8% 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 the 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.

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