Fitch Affirms Deutsche Bank Securities, Inc's COMM 2014-UBS4 Mortgage Trust Comm'l Pass-Through Ctfs
KEY RATING DRIVERS
The affirmations are based on the stable performance of the underlying collateral pool since issuance. There are no loans in special servicing, but seven loans representing 12% of the current pool balance have been placed on the servicer's watchlist.
As of the June 2015 remittance, the pool has experienced 0.6% of collateral reduction since issuance. No loans are defeased.
State Farm Portfolio is the largest loan in the pool, representing 10% of the current pool balance. The portfolio comprises 14 suburban office properties spread across 11 cities in 11 states. All of the properties are 100% leased to State Farm Mutual Automobile Insurance Company (State Farm) and act as regional operations headquarters. Leases on approximately 92.4% of the portfolio net rentable area (NRA) extend to 2028. Fitch does not maintain a rating on State Farm; however, the agency's opinion of the tenant's overall trend, market position and capital were Steady, according to an Unrated Issuer Report published in January 2015. None of the leases were structured with termination options. The trust loan is a pari-passu piece of a $383.5 million whole loan, which, in addition to $86 million of mezzanine debt and $76.7 million of sponsor equity, was used to acquire the portfolio.
The second largest loan, 597 Fifth Avenue, is on the servicer's watchlist for vacancy issues. The collateral consists of two adjacent pre-war buildings totalling 80,032 sf of retail and office space. 597 Fitch Avenue makes up the majority of the collateral space, and the adjacent 3 East 48th Street also provides ground floor retail and office space to the loan collateral. At issuance, the property was 47.4% occupied, with all of the property's vacancy represented by office space. An April 2015 rent roll indicates the borrower has been able to sign one new lease and is building out space for another incoming tenant, increasing the occupancy to 53.6%; however, all remaining leases are scheduled to roll in 2015 and 2016. The largest tenant, Sephora (15.3% of the NRA) operates its flagship store from the subject property, and leases the ground floor retail space with Fifth Avenue frontage through June 2016. The loan is interest-only for the full term and was structured with an upfront reserve of $1.2 million to meet interest shortfalls and act as additional collateral for the loan. As of the June 2015 remittance, the interest shortfall reserve had a remaining balance of $1.2 million, and there was an additional $80,052 available for tenant rollover costs. The borrower cashed out $23.8 million at closing.
The third largest loan is secured by the Refinery Hotel, a 197-key full-service boutique hotel in the Midtown West neighborhood of New York City. The building had previously operated as a hat factory, and underwent a full gut renovation prior to opening under its current name in May 2013. Given the property's limited operating history, it is difficult to gauge the subject's performance in relation to other unflagged hotels in the Fashion District; however, according to a YE2014 operating statement analysis report, the December 2014 occupancy rate was 90.7% and the ADR and RevPAR were reported to be $348.03 and $315.70, respectively. The loan refinanced prior debt and returned approximately $23.8 million to the sponsor.
RATING SENSITIVITIES
All classes maintain Stable Outlooks. Due to the recent issuance of the transaction and stable performance of the underlying collateral, Fitch does not expect positive or negative ratings migration unless material economic or asset-level changes to the pool metrics warrant such changes.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
--$45.6 million class A-1 at 'AAAsf', Outlook Stable;
--$143.2 million class A-2 at 'AAAsf', Outlook Stable;
--$80.3 million class A-SB at 'AAAsf', Outlook Stable;
--$21.2 million class A-3 at 'AAAsf', Outlook Stable;
--$250 million class A-4 at 'AAAsf', Outlook Stable;
--$353.7 million class A-5 at 'AAAsf', Outlook Stable;
--$93.4 million class A-M at 'AAAsf', Outlook Stable;
--987.4 million class X-A at 'AAAsf', Outlook Stable;
--$58 million class B at 'AA-sf', Outlook Stable;
--$206.1 million class PEZ at 'A-sf', Outlook Stable;
--$54.7 million class C at 'A-sf', Outlook Stable.
The class A-M, B and C certificates may be exchanged for class PEZ certificates, and vice versa. Fitch does not rate the interest-only class X-B, X-C or X-D certificates or the class D, E, F or G certificates.
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