DBRS Morningstar Confirms All Classes of WFRBS Commercial Mortgage Trust 2014-C21

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on classes of Commercial Mortgage Pass-Through Certificates, Series 2014-C21 issued by WFRBS Commercial Mortgage Trust 2014-C21 as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-SBFL at AAA (sf)
-- Class A-SBFX 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 (low) (sf)
-- Class D at BB (high) (sf)
-- Class X-C at B (sf)
-- Class E at B (low) (sf)
-- Class F at CCC (sf)

Negative trends were maintained for Classes D, E, X-B, and X-C, while all other trends are Stable, except for Class F, which has a rating that does not carry a trend. Interest in Arrears was also removed for Class F, as the previously outstanding interest shortfalls have been repaid.

The rating confirmations reflect the transaction’s recent performance, which has been stable since February 2021, when DBRS Morningstar downgraded six classes. Montgomery Mall (Prospectus ID#9) was liquidated from the trust and the $21.8 million loss was realized in the December 2021 remittance report. The loss is slightly below the loss of $25.0 million assumed as part of the review for the February 2021 rating action. One other loan, Fitch Apartments (Prospectus ID#52), liquidated from the trust in April 2019 with a realized loss of $1.6 million. All to date have been contained in the unrated Class G, but the projected and now realized reduced credit support for the lowest rated bonds was a driver for the downgrades in February 2021.

At issuance, the trust comprised 121 fixed-rate loans secured by 145 commercial and multifamily properties with a trust balance of $1.43 billion. As of the January 2022 remittance, 102 of the original 121 loans remained in the pool with a trust balance of $1.07 billion, representing a collateral reduction of approximately 25% since issuance. The trust benefits from its high concentration of loans secured by multifamily properties, representing just under 20% of the trust balance, and its relatively low concentration of loans secured by retail properties, representing just under 15% of the trust balance. The pool is relatively granular by loan size as the largest 15 loans comprise just over half of the trust balance. There are 21 loans, representing 15% of the trust balance, that have fully defeased.

Four loans, representing 8.1% of the pool balance, are in special servicing, including three loans in the top 15. The largest specially serviced loan is Tryp by Wyndham Times Square (Prospectus ID#8 – 3.8% of the trust balance), which is secured by a hotel in the Theatre District of Midtown in New York. The property was reappraised in October 2021 with an as-is value of $56.6 million, up from the June 2020 appraised value of $40.3 million, but still 35% below the $87.2 million appraised value at issuance. The special servicer reports a foreclosure is being pursued, but also notes workout discussions with the borrower remain ongoing. The loan was last paid in October 2020, as of the January 2022 remittance report. Although the severe delinquency, value declines from issuance, and performance declines from issuance that preceded the onset of the Coronavirus Disease (COVID-19) pandemic suggest significantly increased risks from issuance, DBRS Morningstar notes the most recent value does suggest cushion above the $45.0 million trust exposure.

The second-largest specially serviced loan, The Bluffs (Prospectus ID#10 – 2.3% of the trust balance), is secured by a multifamily complex in Junction City, Kansas. The property primarily serves as military housing for Fort Riley soldiers and civilian staff. The loan transferred to the special servicer in May 2020 and the collateral became real estate owned as of November 2021. The special servicer plans to continue stabilizing the asset before disposing in late 2022. The collateral was reappraised in May 2021 for a value of $29.8 million, up from the September 2020 value of $27.3 million, but still down 38.3% from the appraised value of $48.3 million at issuance. The May 2021 appraised value indicates an implied loan-to-value (LTV) ratio of 94.5% based on the trust exposure of $28.2 million, suggesting a moderate loss could be realized at disposition.

The third-largest loan in special servicing, Oak Court Mall (Prospectus ID#15 – 1.9% of the trust balance), is a pari passu participation in a whole loan secured by a portion of a super-regional mall in Memphis, Tennessee. The loan transferred to the special servicer in May 2020 and the loan sponsor, Washington Prime Group, ultimately notified the servicer of its desire to transfer title to the trust. The collateral was reappraised in April 2021 for a value of $15.5 million, slightly up from the $15.0 million appraised value in July 2020, but considerably below the $61.0 million appraised value at issuance. The implied LTV ratio for the whole loan increased to well over 200%, compared with 65.3% at issuance. Based on this value, DBRS Morningstar believes a loss severity in excess of 70.0% will be realized, supporting the CCC (sf) rating for Class F and a contributor to the Negative trends for the four classes as outlined above.

There is also a high concentration of loans on the servicer’s watchlist, with 31 loans representing 43.9% of the pool as of the January 2022 remittance. The largest watchlisted loan, Fairview Park Drive (Prospectus ID#1 – 8.4% of the trust balance), is being monitored for a low debt service coverage ratio; however, the property’s occupancy rate has recently rebounded and concessions driving low base rent collections expired in July 2021, suggesting 2022 cash flows should improve significantly. Seven loans, representing approximately 14% of the trust balance, are on the servicer’s watchlist for nonperformance issues related to deferred maintenance.

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#8 – Tryp by Wyndham Times Square (3.8% of the pool)
-- Prospectus ID#10 – The Bluffs (2.3% of the pool)
-- Prospectus ID#15 – Oak Court Mall (1.9% of the pool) – DBRS Morningstar Hotlist Loan

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 at dbrsmorningstar.com/about/methodologies. Links to the methodology referenced in this transaction are listed at the end of this press release. 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.

This rating was disclosed to the master servicer and trustee, as representatives of the issuer, through the 17g-5 information provider, master servicer directly, and/or the depositor and amended following that disclosure before being assigned.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on this transaction took place on December 22, 2021, when the rating for Class X-D was discontinued and withdrawn. The underlying bond referenced by the notional IO bond listed above is rated CCC (sf) by DBRS Morningstar.

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 further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: Joe Shmigelsky, Assistant Vice President, Credit Ratings
Rating Committee Chair: Richard Carlson, Managing Director, Credit Ratings
Initial Rating Date: July 14, 2014

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

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

North American CMBS Surveillance Methodology (March 26, 2021) https://www.dbrsmorningstar.com/research/375979

DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021) https://www.dbrsmorningstar.com/research/373262