KBRA Upgrades One Rating, Withdraws Three Ratings, and Affirms All Other Ratings for WFRBS 2014-C19
28 Mar 2024 | New York
KBRA upgrades the rating of one class of certificates, withdraws the ratings of three classes of certificates, and affirms all other outstanding ratings of WFRBS 2014-C19, a $95.8 million CMBS conduit transaction. The upgraded Class D rating reflects the increased certificate C/E levels due to deleveraging from loan payoffs and amortization. In addition, KBRA withdraws its ratings on Classes B, C, and PEX following the reduction of the principal balance of the rated securities to zero as reflected in the transaction's March 2024 remittance report. There were no principal losses or interest shortfalls reported on the withdrawn securities during their respective lives.
The transaction consists of seven remaining loans, six of which (48.1% of the pool balance) have been identified as K-LOCs, including five (38.7%) which are non-performing matured balloon loans. The largest loan is Nordic Cold Storage Portfolio (51.9%), the only remaining loan not identified as a K-LOC. The loan is collateralized by eight single-tenant cold storage/warehouse properties located in Alabama, Georgia, Mississippi, and North Carolina, all 100% leased to affiliates of Nordic Cold Storage. The loan is performing, with an ARD in March 2024 and a final maturity date in March 2044. The details of the K-LOCs are outlined below.
Waltonwood at Lakeside (2nd largest, 18.1%, K-LOC, Underperform)
- The loan is collateralized by 122 independent living units that are part of a 197 unit senior care community located in Sterling Heights, Michigan, approximately 23 miles north of the Detroit CBD.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to its transfer to the special servicer for payment default during the March 2024 remittance period and its non-performing matured balloon status. Although the loan had been previously paid current since the October 2021 remittance period, cash flow has declined and the DSC has not been above breakeven since FY 2018. Disruption from renovations, increased operating expenses, and new competitive market supply have all contributed to ongoing weak performance.
- The servicer-reported occupancies and DSCs are: 91.0% / 0.67x (FY 2023), 90.0% / 0.43x (FY 2022); at closing these were 89.0% / 1.38x. KBRA's analysis resulted in an estimated loss of $2.6 million (15.0% estimated loss severity).
Springhill Suites Birmingham (3rd largest, 13.6%, K-LOC, Underperform)
- The loan is collateralized by a 150 key limited-service hotel located in the Birmingham, Alabama CBD, less than one mile northwest of the University of Alabama - Birmingham.
- KBRA identified the loan as a K-LOC and revised its KPO to Underperform from Perform due to its transfer to the special servicer for payment default during the January 2024 remittance period and its non-performing matured balloon status. Property performance was negatively impacted by the COVID-19 pandemic and the loan's DSC only returned to breakeven as of YE 2023. According to the special servicer, an executed pre-negotiation agreement is in place and it is negotiating a short-term forbearance with the sponsor to give it additional time to pay off the loan. If terms are not agreed upon, the special servicer will pursue foreclosure.
- According to a STR report dated June 2023, the property achieved 56.6% occupancy, $141 ADR, and $80 RevPAR, resulting in a RevPAR penetration rate of 85.9%, which indicates that the asset is underperforming within its competitive set. The servicer-reported occupancies and DSCs are: 61.0% / 1.02x (FY 2023), 49.0% / 0.92x (FY 2021); at closing these were 66.0% / 1.45x. At this time, KBRA does not estimate a loss on this asset.
Boise Spectrum (4th largest, 9.5%, K-LOC, Underperform)
- The loan is collateralized by a 170,780 sf anchored retail center located in Boise, Idaho. Major tenants at the property include Regal Cinemas (62.3% of sf) and IMAX (5.8%), along with several restaurants.
- KBRA maintains the loan's K-LOC designation and assigns a KPO of Underperform due to its upcoming maturity date in April 2024, along with its exposure to Regal Cinemas, and limited cash flow growth. Regal Cinemas leases 106,402 sf subject to a lease expiring in December 2028. The parent company of Regal Cinemas, Cineworld, filed for Chapter 11 bankruptcy protection in September 2022 and emerged from bankruptcy in July 2023 after closing more than 120 locations. In addition, an IMAX theater leases 9,892 sf (5.8%) subject to a MTM lease. At the time of this review, IMAX appears to be open and operating. According to the servicer, the borrower has received a payoff statement and has indicated that it expects to pay off the loan at maturity.
- The servicer-reported occupancies and DSCs are: 93.0% / 1.62x (FY 2023), 93.0% / 1.51x (FY 2022); at closing these were 90.0% / 1.49x. At this time, KBRA does not estimate a loss on this asset.
17211 North Freeway (5th largest, 3.1%, K-LOC, Underperform)
- The loan is collateralized by a 109,000 sf single-tenant retail property located in Houston, Texas, approximately 19 miles north of the CBD. The collateral's sole tenant, Floor & Decor, vacated at its November 2023 lease expiration and the property is now vacant.
- KBRA identified the loan as a K-LOC and assigned a KPO of Underperform due to its transfer to the special servicer for payment default during the January 2024 remittance period and its non-performing matured balloon status. According to the special servicer, it intends to enter into a forbearance agreement with the borrower. The property is currently being marketed for sale or lease.
- The servicer-reported occupancies and DSCs are: 100% / 1.84x (YTD March 2022), 100% / 1.95x (FY 2021); at closing these were 100% / 1.77x. KBRA’s analysis resulted in an estimated loss of $514,575 (17.4% estimated loss severity).
Holiday Air (6th largest, 2.3%, K-LOC, Underperform)
- The loan is collateralized by a 98 unit garden-style multifamily property located in Grand Forks, North Dakota.
- KBRA identified the loan as a K-LOC and assigned a KPO of Underperform due to its transfer to the special servicer for payment default during the March 2024 remittance period and its non-performing matured balloon status. According to the servicer, it is unaware of the borrower's plans to pay off the loan.
- The servicer-reported occupancies and DSCs are: 99.0% / 1.39x (FY 2023), 99.0% / 1.20x (FY 2022); at closing these were 100% / 1.35x. At this time, KBRA does not estimate a loss on this asset.
Seven Oaks (7th largest, 1.6%, K-LOC, Underperform)
- The loan is collateralized by a 232 pad mobile home community located in Mission, Texas, approximately two miles from the Mexico border.
- KBRA maintains the loan's K-LOC designation and assigns a KPO of Underperform due to its transfer to the special servicer for payment default during the March 2024 remittance period and its non-performing matured balloon status. The loan's performance has deteriorated since 2020 due to a decline in property occupancy that began during the COVID-19 pandemic and has not improved to date.
- The servicer-reported occupancies and DSCs are: 47.0% / -0.46x (YTD September 2023), 51.0% / 1.10x (FY 2022); at closing these were 75.0% / 1.40x. At this time, KBRA does not estimate a loss on this asset.
Details concerning the classes with ratings changes are as follows:
- Class B to WR from AA+ (sf)
- Class C to WR from A (sf)
- Class PEX to WR from A (sf)
- Class D to BBB- (sf) from BB- (sf)
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 rating and relevant documents, click here.