Press Release|CMBS
KBRA Affirms All Ratings for COMM 2014-LC15
11 Dec 2024 | New York
KBRA affirms all of its outstanding ratings for COMM 2014-LC15, a $62.2 million CMBS conduit transaction. The affirmations follow a surveillance review of the transaction, which has exhibited an increase in KBRA's estimated loss since last ratings change in December 2023, however, the magnitude of the losses does not warrant further changes at this time.
There are six assets remaining in the transaction. The largest, 100 Westminster (61.6% of pool balance) was modified and extended to February 2025 since last review. Of the other remaining assets, one is listed as REO (13.0%), two are matured non-performing loans (19.5%), and two are fully defeased loans (5.9%). The details of the assets are outlined below.
100 Westminster (largest, 61.6%, K-LOC, Underperform, Matured Performing)
- The loan is collateralized by a 19-story, 361,462-sf, Class-A office property in downtown Providence, Rhode Island.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform based on it failing to pay off at its February 2024 scheduled maturity and executing a modification. The loan was transferred to the special servicer in September 2023. A modification extension agreement was executed in April 2024, extending the maturity to February 2025. The modification also includes an option to extend the loan through February 2026 pending property performance conditions. The loan will remain cash managed through the entirety of the extended term. According to the June 2024 rent roll, inclusive of additional leasing updates, the property is 82.5% leased, in line with last review (81.1%), however down from 91.8% at issuance. The decline in occupancy since issuance is primarily due to the loss of the two tenants, GSA US Attorney's Office and Twin River Management Group, which accounted for approximately 16.0% of base rent and 14.0% of total collateral sf during the 2022 review. According to special servicer updates, the borrower is expected to exercise the second extension option through February 2026.
- The servicer-reported occupancies and DSCs are: 80.0% / 1.36x (FY 2023), 89.0% / 1.68x (FY 2022); at closing, these were 81.0% / 1.26x. An appraisal dated March 2024 valued the property at $38.3 million ($106 per sf), which is approximately the outstanding loan balance and represents a 41.3% decrease from the $65.3 million ($181 per sf) value at issuance. At this time, KBRA does not estimate a loss on this asset based on the modification.
Moss-Bauer Apartments (2nd largest, 13.0%, K-LOC, Underperform, REO)
- The loan is collateralized by a 28-unit, mid-rise, multifamily apartment building in New Orleans, Louisiana. The property includes three additional commercial units totaling 2,415 sf. Built in 1928 and renovated in 2013, the property is located in the CBD of New Orleans, making the apartment building easily accessible. The loan matured in February 2024.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform based on its status with the special servicer. Even though the loan status is REO, from the special servicer commentary it does not appear a foreclosure has yet to take place. The loan was transferred to the special servicer in April 2018 due to a non-monetary default related to collateral performance concerns. In August 2022, a forbearance was executed and the terms included a partial guaranty of approximately $1.0 million in exchange for the loan to be converted to interest-only. Per special servicer updates, a receivership order was entered on October 31, 2024 and negotiations are ongoing between the special servicer and borrower in relation to the payment of the limited guaranty. Additionally, servicer NCF declined by 63.6% for the annualized September 2023 period from issuance.
- The servicer-reported occupancies and DSCs are: 56.7% / 0.52x (YTD September 2023), 83.0% / 0.59x (FY 2022); at closing these were 96.0% / 1.28x. An appraisal dated February 2024 valued the portfolio at $8.0 million ($285,714 per unit), which is 31.0% below the $11.6 million ($414,300 per unit) value at issuance. As a result, the asset carries an ARA of $1.5 million, resulting in a cumulative ASER of $195,677. As of the November 2024 remittance, total advances was reported at $1.2 million. KBRA's analysis resulted in an estimated loss of $5.2 million (64.2% estimated loss severity) on the loan balance of $8.1 million based on a KBRA value of $4.8 million ($170,428 per unit).
Ithaca Hotel Portfolio (3rd largest, 9.9%, K-LOC, Underperform, Matured Non-Performing)
- The loan is collateralized by two limited-service hotels located in Ithaca, New York. Country Inn & Suites Ithaca (66.5%of the allocated loan amount) contains 58 keys and is three miles south of the city’s CBD and one mile south of Ithaca College. Econo Lodge Ithaca (33.5%) contains 72 keys and is four miles north of the city’s CBD and three miles north of Cornell University.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform due to the loan's status with the special servicer, and its delinquent status. The loan transferred to the special servicer in March 2020 for imminent monetary default. The borrower filed for chapter 11 bankruptcy protection on May 13, 2022. The debtors consented to the appointment of a trustee, GF Hotels. The trustee is moving towards the liquidation of both assets in bankruptcy and a sale plan was scheduled to close by the fourth quarter of 2023. Per special servicer updates, the potential buyer defaulted under the purchase and sale agreement. As of the current review, the special servicer and trustee expect to list the two hotels for sale with a target of closing a sale in the first quarter of 2025.
- The servicer-reported occupancies and DSCs are: 63.0% / N/A (TTM March 2024), 64.0% / 0.24x (FY 2023); at closing, these were 60.0% / 1.70x. An appraisal dated March 2024 valued the portfolio at $9.9 million ($76,000 per key), which is 18.2% below the $12.1 million ($93,077 per key) value at issuance. As a result, the loan has a cumulative ASER of $8,345. KBRA's analysis resulted in an estimated loss of $679,519 (11.0% estimated loss severity) on a loan balance of $6.2 million based on a KBRA value of $6.0 million ($46,154 per key).
865 Lexington Retail (4th largest, 9.6%, K-LOC, Underperform, Matured Non-Performing)
- The loan is collateralized by a 5,124 sf retail property located in New York, New York. The retail space is located on the ground floor of the Toraine building, a luxury residential condominium, and is 100% leased to Le Pain Quotidien, a European café chain.
- KBRA maintains the loan's K-LOC designation and assigns it a KPO of Underperform due to the loan failing to pay off at its March 2024 scheduled maturity, in addition to declining financial performance since issuance. The loan was transferred to the special servicer in April 2024 due to maturity default. According to recent special servicer updates, the parties are currently negotiating the terms of an extension, which includes an initial 12-month forbearance period with a retroactive commencement date of March 6, 2024 and a maturity date in March 2025. The terms allow the option to extend the forbearance period for an additional 12-months resulting in a maturity date in March 2026, provided no event of default is present. Additionally, the sole tenant, Le Pain Quotidien had a lease initially scheduled to expire in January 2024, however according to the September 2024 rent roll, the tenant has renewed its lease through 2034.
- The servicer-reported occupancies and DSCs are: 100% / 1.35x (YTD March 2024), 100% / 0.74x (FY 2023); at closing, these were 100% / 1.84x. An appraisal dated May 2024 valued the property at $6.4 million ($1,249 per sf), which compares to the $12.0 million ($2,342 per sf) at issuance. As a result, the asset carries an ARA of $518,867 and a cumulative ASER of $6,203. At this time, KBRA does not estimate a loss on this asset which has an outstanding balance of $6.0 million.
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as the magnitude and extent of interest shortfalls, if any, on the certificates.
To access ratings and relevant documents, click here.
Related Publication
Methodologies
- CMBS: North American CMBS Property Evaluation Methodology
- CMBS: North American CMBS Single Borrower & Large Loan Rating Methodology
- Structured Finance: Global Structured Finance Counterparty Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
- ESG Global Rating Methodology