KBRA Downgrades Four Ratings and Affirms All Other Ratings for COMM 2014-UBS3
12 Mar 2025 | New York
KBRA downgrades the ratings of four classes of certificates and affirms all other outstanding ratings for COMM 2014-UBS3, a $289.4 million CMBS conduit transaction which has five assets remaining in the mortgage pool, each of which have been identified as K-LOCs. The rating actions follow a surveillance review of the transaction, which has had a meaningful increase in KBRA's estimated losses since our last ratings change in March 2024. As of the February 2025 remittance period, one loan (29.7% of the pool balance) is in foreclosure, one (24.2%) has a matured non-performing balloon status, and two (16.7%) are REO. The details of the loans are outlined below.
Equitable Plaza (largest, 29.7%, K-LOC, Specially Serviced, Foreclosure)
- The loan is collateralized by a 688,292 sf, 32-story, Class-A office building located in the Wilshire District of Los Angeles, California, approximately three miles northwest of the city’s CBD.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to its foreclosure status following the loan's transfer to special servicing in April 2024 for imminent maturity default. The borrower failed to pay off the loan at its June 2024 maturity. According to servicer commentary, the borrower is seeking a maturity date extension. Negotiations are being dual-tracked with foreclosure proceedings until a resolution is reached.
- The servicer-reported occupancies and DSCs are: 57.0% / 1.12x (YTD September 2023), 67.0% / 1.68x (FY 2021); at closing these were 85.8% / 1.33x. KBRA 's analysis resulted in an estimated loss of $9.5 million on a whole loan balance of $85.9 million (11.0% estimated loss severity). The loss is based on a distressed liquidation value of $77.5 million ($113 per sf).
State Farm Portfolio (2nd largest, 29.5%, K-LOC, Watchlist)
- The loan is collateralized by a portfolio originally comprising 14 Class-A and Class-B suburban office buildings located in 11 states. The portfolio totaled 3.4 million sf, and the individual properties ranged in size from 105,639 to 402,177 sf, with an average of 242,699 sf. The portfolio is 95.8% leased to State Farm, pursuant to leases that primarily expire in 2028, four years after the loan's ARD.
- KBRA maintains the loan's K-LOC designation and its KPO of Underperform based on prior delinquency and special servicing status. The loan was returned to the master servicer in February 2025 after a partial release of one property. The borrower did not pay off the loan at its April 2024 ARD, which is expected to result in an increased interest rate. The loan's final maturity is in April 2029.
- The servicer-reported occupancies and DSCs are: 94.0% / 2.06x (FY 2023), 100% / 2.06x (FY 2022); at closing these were 100% / 2.02x. KBRA's analysis resulted in an estimated loss of $73.5 million on a whole loan balance of $328.8 million (22.4% estimated loss severity). The loss is based on a distressed liquidation value of $257.1 million ($76 per sf).
Southfield Town Center (3rd largest, 24.2%, K-LOC, Specially Serviced, Matured Non-Performing Balloon)
- The loan is collateralized by a 35-acre office complex comprising five office buildings totaling 2.2 million sf that are located in Southfield, Michigan, approximately 15 miles northwest of the Detroit CBD.
- KBRA identified the loan as a K-LOC and revised its KPO to Underperform from Perform based on the loan's matured non-performing balloon status with the special servicer after it failed to pay off at its May 2024 maturity. According to the special servicer, a modification is the primary workout strategy, and a resolution is expected in the near term.
- The servicer-reported occupancies and DSCs are: 75.0% / 2.12x (YTD September 2024), 77.0% / 2.07x (FY 2023); at closing these were 67.2% / 1.85x. At this time, KBRA does not estimate a loss on this asset.
1100 Superior Avenue (4th largest, 15.6%, K-LOC, Specially Serviced, REO)
- The asset is a 576,766 sf, Class-A office building located in the CBD of Cleveland, Ohio.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on its REO status as of January 2023. According to special servicer commentary, the property is not being marketed for sale at this time.
- The subject was re-appraised for $15.0 million ($26 per sf) in April 2024, a 78.6% decline from $70.0 million ($121 per sf) at issuance. KBRA's analysis resulted in an estimated loss of $34.6 million on a whole loan balance of $45.1 million (76.6% estimated loss severity).
Executive Center IV (5th largest, 1.1%, K-LOC , Specially Serviced, REO)
- The asset is an 85,613 sf, Class-B office building in Waukesha, Wisconsin, which is located approximately 12 miles west of Milwaukee.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on its REO status and failure to pay off at its April 2024 maturity. According to the special servicer, the asset will be auctioned in the next 12 months, with a starting bid of $800,000.
- The subject was re-appraised for $3.1 million ($36 per sf) in June 2024, a 57.5% decline from $7.3 million ($85 per sf) at issuance. KBRA's analysis resulted in an estimated loss of $806,757 on a whole loan balance of $3.1 million (26.1% estimated loss severity).
Details concerning the ratings adjustments are as follows:
- Class C to BBB- (sf) from A- (sf)
- Class D to B- (sf) from BB- (sf)
- Class E to CCC (sf) from B- (sf)
- Class PEZ to BBB- (sf) from A- (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 ratings and relevant documents, click here.