KBRA Withdraws One Rating and Affirms All Other Ratings for CG-CCRE 2014-FL2
22 Nov 2024 | New York
KBRA affirms all of its outstanding ratings for the principal and interest classes of CG-CCRE 2014-FL2, a CMBS large loan transaction. Additionally, KBRA withdraws its rating for the interest-only Class X-EXT, pursuant to its methodology, as the referenced P&I classes have either been paid in full or downgraded to ratings that are below investment grade. The affirmations follow a surveillance review of the transaction which has one remaining loan. Since last review, the only remaining loan, Colonie Center (100% of the pool balance) failed to payoff by its scheduled maturity date of December 2023, and is considered a non-performing specially serviced asset. Additionally, the South Towne Center loan (28.7% of the issuance balance) was paid off post-maturity in August 2024. The details of the remaining asset are outlined below.
Colonie Center (largest, 100%, K-LOC, Underperform)
- The loan is collateralized by the borrower’s fee simple interest in 759,750 sf of Colonie Center, a 1.3 million sf super-regional mall located in Albany, New York, approximately nine miles northwest of the Albany CBD. The property had three traditional mall anchors at closing, which included Macy’s (299,436 sf), Sears (275,811 sf) and Boscov’s (225,000sf). Neither Macy’s nor Sears serve as collateral for the loan, as each owns their respective improvements and underlying land. The non-collateral Sears, which closed in September 2017, was owned by Seritage Growth Properties, which was previously in the process of subdividing the space and planned to re-tenant it with high-end retailers. Approximately 136,742 square feet of the former Sears space was subleased to seven tenants including Floor & Décor (57,204 sf), Whole Foods (33,783 sf), Sierra (19,100 sf), BJ’s Brewhouse (8,650 sf), Ethan Allen (8,000 sf), Cycle Gear (6,530 sf), and Sleep Number (3,475 sf).
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on its non-performing matured balloon status with the special servicer. The loan matured in August 2019, and was granted a maturity extension through December 2023. The loan failed to payoff a second time in December 2023 and transferred to the special servicer at that time. Local counsel has been retained to file for foreclosure and/or receivership, if necessary.
- According to the June 2024 rent roll, and inclusive of additional leasing updates, the collateral property was 95.5% leased, compared to 90.0% at last review and 93.1% at closing. Scheduled lease expiration risk is moderate to low until 2028, when 9 leases representing 28.1% of base rent are scheduled to expire. The largest expiring tenants in 2028 are Regal Cinemas and Boscov’s, which represent 15.9% and 8.3% of base rent, respectively. No other tenant expiring in 2028 represents more than 1.3% of total base rent. The current KNCF is 15.7% below the FY 2023 servicer-reported NCF due to KBRA's application of below line-item expenses, in line with last review, whereas the servicer did not report below line-item expenses consistently year-over-year. The current KNCF if 10.3% below KNCF at last review due to a decline in base rent according to the June 2024 rent roll.
- An appraisal dated January 2024 valued the property at $67.5 million ($89 per sf), which is 53.4% below the $145.0 million ($191 per sf) appraised value at issuance. As a result, the asset carries an ARA of $5.2 million, resulting in a cumulative ASER of $352,764. KBRA’s analysis resulted in an estimated loss of $52.7 million (51.9% estimated loss severity) on the whole loan balance of $101.5 million, which is based on a KBRA value of $57.5 million. The KBRA value is derived from a KNCF of $7.2 million and a cap rate of 12.5%.
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 Single Borrower & Large Loan Rating Methodology
- CMBS: North American CMBS Property Evaluation Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
- Structured Finance: Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology