Fitch Affirms COMM 2014-CCRE16
KEY RATING DRIVERS
The affirmations are the result of stable performance of the underlying collateral pool since issuance. As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 0.6%. No loans are defeased. Interest shortfalls are currently affecting class G.
There is currently one Fitch loan of concern which represents the only specially serviced loan in the pool (0.65%). Four loans (18.25%) are currently on the master servicer's watchlist, including the largest (25 Broadway) and fourth largest (Google and Amazon Office Portfolio) loans in the pool. Both loans are on the watchlist for a decline in their debt service coverage ratios (DSCR) since issuance; both loans had concession periods which were accounted for and escrowed for at issuance. Neither is considered to be a Fitch loan of concern. The other two watchlist loans are both related to minor issues and are anticipated to be resolved without transfer to the special servicer.
The specially serviced loan is secured by a hotel portfolio comprised of a total of 192 rooms from three hotels, a Quality Inn, Modern Inn and Comfort Inn, all of which are located throughout Indiana. The loan was transferred to the special servicer in November 2014 as a result of the borrower terminating their in-place franchise agreement in August 2014 without lender notification. According to the special servicer, they are working with the borrower to remedy the default by approving the change in their franchise agreement. The loan continues to perform with underwritten expectations with a 2014 partial-year net operating income (NOI) DSCR of 2.2x which is nearly identical to issuance.
The largest loan in the pool is 25 Broadway, which is secured by a 23-story office building located in the Financial District in New York City. The loan is subject to a \\$130 million pari-passu note that is within the COMM 2014-CR17 transaction. As of September 2014, 25 Broadway was 96% occupied which is in line with issuance. The year-to-date (YTD) NOI DSCR through September 2014 was 1.18x, down from 2.02x at issuance. As mentioned above, the decrease in the DSCR is a result of free rent for multiple tenants; the amount of free rent was approximately \\$10.6 million and was escrowed at issuance. According to the servicer, had the escrowed rent been included in the analysis, the resulting DSCR would be 1.74x.
The second largest watchlist loan is the Google and Amazon Office Portfolio which is secured by two office properties containing 1.1 million square feet located in Sunnyvale, CA. Both properties are 100% leased to Google (64%) and Amazon (36%) who reportedly just took occupancy. The YTD NOI DSCR through September 2014 was reported at 1.08x, compared to 1.41x at issuance. The loan is on the watchlist due to the decline in DSCR that is attributable to rent concessions to Amazon. According to the servicer, reserves were distributed for the free rent and if the reserves were included in the DSCR calculation, the DSCR would increase to 1.18x.
RATING SENSITIVITIES
All classes maintain Stable Outlooks. 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. Additional information on rating sensitivity is available in the report 'COMM 2014-CCRE16 Mortgage Trust' (May 30, 2014), available at www.fitchratings.com.
Fitch affirms the following classes as indicated:
--\\$47.6 million class A-1 at 'AAAsf'; Outlook Stable;
--\\$144.9 million class A-2 at 'AAAsf'; Outlook Stable;
--\\$74.2 million class A-SB at 'AAAsf'; Outlook Stable;
--\\$190 million class A-3 at 'AAAsf'; Outlook Stable;
--\\$281.4 million class A-4 at 'AAAsf'; Outlook Stable;
--\\$74.5 million class A-M at 'AAAsf'; Outlook Stable;
--\\$58.5 million class B at 'AA-sf'; Outlook Stable;
--\\$0 class PEZ at 'A-sf'; Outlook Stable;
--\\$47.9 million class C at 'A-sf'; Outlook Stable;
--\\$54.5 million class D at 'BBB-sf'; Outlook Stable;
--\\$25.3 million class E at 'BBsf'; Outlook Stable;
--\\$10.6 million class F at 'Bsf'; Outlook Stable;
--\\$812.6 million* class X-A at 'AAAsf'; Outlook Stable;
--\\$160.9 million* class X-B at 'BBB-sf'; Outlook Stable;
--\\$25.3 million* class X-C at 'BBsf'; Outlook Stable.
*Notional amount and interest only.
Fitch does not rate the class G and class X-D certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
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