Fitch Affirms CGCMT 2014-GC25
KEY RATING DRIVERS
The affirmations of CGCMT 2014-GC25 are based on the stable performance of the underlying collateral since issuance. As of the September 2016 distribution date, the pool's aggregate principal balance has been reduced by 0.91% to $834.3 million from $842 million at issuance. The pool has experienced no realized losses to date. De minimis interest shortfalls are currently affecting the non-rated class G. There are currently no delinquent or specially serviced loans, and no loans are defeased. Four loans are currently on the servicers watch list (5.74%).
The largest loan on the servicers watch list is the Denver Merchandise Mart (3.1% of the pool), which is secured by a 810,000 square foot (sf) wholesale trade mart and exhibition hall located in Denver, CO. The property went on the servicer's watchlist after incurring damage from a hail storm in June 2015. A roof replacement was required as a result, and insurance proceeds have been reserved to complete the repairs.
Repair work began in February 2016, with phase I completed. According to the servicer, phase II repairs on the Mart Expansion section of the building were scheduled to be complete in July 2016, with a third phase to begin thereafter on the Mart and Upper Mart sections. Based on servicer reporting, property operations appear to remain stable. The net operating income (NOI) debt service coverage ratio (DSCR) reported at 1.89x at year-end (YE) 2015, compared to 1.96x at issuance. The interim year-to-date (YTD) June 2015 DSCR was higher at 2.56x given the partial year operations reflecting lower expenses (utilities, marketing, payroll, and R&M) for the first half of the year. The servicer reported occupancy is 86% as of June 2016, and was 92% at YE 2015.
The largest loan in the pool (13.2%) is secured by Bank of America Plaza, a 1.4 million sf office building located in downtown Los Angeles. Occupancy has averaged above 90% over the past 10 years, reporting at 92% occupancy per the June 2016 rent roll. Since issuance, the largest tenant, The Capital Group Companies (22.6% of the net rentable area [NRA]), extended its lease for an additional 15 years to February 2033 from its original expiration in February 2018. Other major tenants include Shepard, Mullin, Richter, & Hampton LLC (13.0% of NRA) and Bank of America (rated 'A'; 11.4% of NRA), with lease expirations in December 2024 and June 2022, respectively.
Property NOI has improved since issuance, with the YE 2015 NOI reporting an 8.2% increase over YE 2014, and 21% over the trailing-twelve-month (TTM) June 2014 provided at issuance. The NOI improvement is primarily driven by increased revenues from lease rent steps, plus an increase in other income since issuance. The YTD June 2016 DSCR reported at 2.74x, compared to 2.45x and 2.27x at YE 2015 and YE 2014, respectively.
The second largest set of loans in the pool (7.3% of the pool) consists of five cross-collateralized and cross-defaulted loans secured by five anchored or unanchored retail properties located in CA, ND, or CO. Anchors include Office Depot, Stater Bros, Sears, Chuck E. Cheese, Trader Joes, and King Soopers. The properties across the portfolio have experienced stable operations since issuance. As of June 2016, the combined occupancy for the five properties reported at 92% with NOI DSCR at 2.11x. The largest of the loans is the $20 million Orange Plaza Shopping Center loan (2.4% of the pool), secured by a 132,000 sf shopping center in Redlands, CA. The property is 99% occupied and is anchored by Rite Aid (29% NRA) and Trader Joes (15% NRA) and shadow anchored by Vons grocery store.
RATING SENSITIVITIES
The Rating Outlooks remain Stable for all classes due to stable performance of the pool since issuance. Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's portfolio-level metrics.
Additional information on rating sensitivity is available in the report 'Citigroup Commercial Mortgage Trust 2014-GC25' (Jul. 28, 2015), available at www. fitchratings. com.
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 ratings:
--$22.9 million class A-1 at 'AAAsf'; Outlook Stable;
--$9.8 million class A-2 at 'AAAsf'; Outlook Stable;
--$235 million class A-3 at 'AAAsf'; Outlook Stable;
--$248.8 million class A-4 at 'AAAsf'; Outlook Stable;
--$65.2 million class A-AB at 'AAAsf'; Outlook Stable;
--$634.7 million* class X-A at 'AAAsf'; Outlook Stable;
--$52.6 million* class X-B at 'AA-sf'; Outlook Stable;
--$45.3 million (a) class A-S at 'AAAsf'; Outlook Stable;
--$52.6 million (a) class B at 'AA-sf'; Outlook Stable;
--$40.0 million (a) class C at 'A-sf'; Outlook Stable.
--$137.9 million (a) class PEZ at 'A-sf'; Outlook Stable;
*Notional amount and interest-only.
A Class A-S, B, and C certificates may be exchanged for class PEZ certificates, and class PEZ certificates may be exchanged for up to the full certificate principal amount of the class A-S, B and C certificates.
Fitch does not rate the class D, E, F, G, X-D, X-E, X-F, or X-G certificates.
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