KBRA Downgrades One Rating, Withdraws Three Ratings, and Affirms All Other Ratings for WFRBS 2014-C24
13 Dec 2024 | New York
KBRA downgrades one rating, withdraws three ratings, and affirms all other ratings for WFRBS 2014-C24, a $90.1 million CMBS conduit transaction, which has nine assets remaining in the underlying mortgage pool, all of which have been identified as K-LOCs. The rating actions follow a surveillance review of the transaction and are based on the realized principal loss incurred by class D and KBRA’s estimated losses and recovery on the remaining assets in the pool. In addition, the ratings consider the likelihood of interest shortfalls continuing and potentially going higher in the capital structure as the special servicer resolves the non-performing assets. The rating withdrawals on Classes X-B, X-C, and X-D are done in accordance with KBRA’s Methodology for Rating Interest-Only Certificates because the transaction has 10 or fewer loans remaining.
As of the November 2024 remittance period, there are four specially serviced loans (49.6%), each of which are matured and non-performing.
KBRA identified each of the remaining nine loans in the pool as K-LOCs, seven of which (90.4%) have estimated losses. The details of the K-LOCs with losses are outlined below.
Greenwich Center (Largest, 20.3%, Specially Serviced, K-LOC, Underperform, Matured Non-Performing)
- The loan is collateralized by a 182,583 sf shadowed anchored retail center located in Phillipsburg, New Jersey, approximately 25 miles east of Allentown, Pennsylvania. Phase I of the center is shadow-anchored by a 125,471 sf Target and Phase II is shadow-anchored by a 165,000 sf Lowe's.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on its failure to pay off at scheduled maturity in October 2024 as well as tenant concerns. The loan transferred to the special servicer during the October 2024 remittance period after its failure to pay off at maturity, and the special servicer's commentary indicated the borrower has requested a maturity extension. Additionally, the subject's largest tenant, Big Lots (16% of base rents, October 2031 lease expiration), was expected to vacate the property in November 2024 following the retailer's chapter 11 bankruptcy filing in September 2024.
- The servicer-reported occupancies and DSCs are: 100.0% / 1.05x (YTD September 2023); 84.0% / 0.75x (FY 2022); at closing these were 93.0% / 1.41x. KBRA's analysis resulted in an estimated loss of $5.0 million (27.4% loss severity) on the whole loan balance of $18.3 million. The loss is based on a KBRA liquidation value of $13.5 million ($74 per sf). The value is derived from a direct capitalization approach using a KNCF of $1.0 million and a market based capitalization rate of 7.50%.
Embassy Suites DFW South (2nd largest, 19.5%, K-LOC, Underperform, Matured Performing)
- The loan is collateralized by a 10-story, 305-key, full-service hotel located in Irving, TX, approximately two miles south of the Dallas/Fort Worth International Airport and 15 miles northwest of the Dallas CBD. The hotel was developed on a 6.6-acre site in 1985 as a DoubleTree Hotel and was converted to an Embassy Suites in 1999 after a $4.0 million ($13,115/key) renovation. The sponsor acquired the hotel in 2011 for $22.3 million ($73,115/key) and a brand-mandated Property Improvement Plan (PIP) that included capital upgrades to the guest rooms, food & beverage outlets, and common areas were completed in 2012 at a total cost of $6.8 million ($22,399/key).
- KBRA identified the loan as a K-LOC and assigns a KPO of Underperform based on its failure to pay off at scheduled maturity in October 2024. A forbearance modification was executed during the October 2024 remittance period, however, terms of the forbearance are yet to be disclosed. The loan status was adjusted from matured non-performing to matured performing during the November 2024 remittance period and all outstanding servicer advances were repaid.
- The servicer-reported occupancies and DSCs are: 67.0% / 0.94x (TTM June 2024); 69.0% / 1.31x (FY 2023), 70.0% / 1.40x (FY 2022); at closing these were 76.0% / 1.83x. KBRA's analysis resulted in an estimated loss of $3.4 million (19.5% loss severity) on the whole loan balance of $17.6 million. The loss is based on a KBRA liquidation value of $14.1 million ($46,342 per key). The value is derived from a direct capitalization approach using a KNCF of $1.6 million and a capitalization rate of 11.00%.
Orlando Plaza Retail Center (3rd largest, 19.5%, Specially Serviced, K-LOC, Underperform, Matured Non-Performing)
- The loan is collateralized by a 101,330-sf anchored retail center located in the CBD of Orlando, FL. The property is part of a 2.3-acre mixed-use condominium development known as The Plaza, which consists of multiple condominium units contained in three towers. The overall development includes 44,330 sf of ground floor retail space; a 12-screen, 57,000 sf movie theater located on the second floor; a 1,600-space parking garage located on floors 3 through 7; 331,000 sf of office space located on floors 8 through 16 in the North Tower; 211,859 sf of Class-A office space located on floors 8 through 21 of the South Tower; and a 26-story, 306-unit residential tower. Only the retail and movie theater condominium units serve as collateral for the subject loan.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on its failure to pay off at scheduled maturity in November 2024. The asset received a non-recoverable determination during the November 2024 remittance period. The loan was delinquent from April 2020 until scheduled maturity and the special servicer filed a foreclosure complaint in November 2022. The borrower agreed to a consensual receivership and the November 2024 special servicer's commentary indicated court approval of the receivership sale was pending. An April 2024 appraisal of the subject valued the collateral at $15.1 million ($149 per sf), which is below the appraised value at issuance of $26.5 million. An ARA of $7.3 million was assigned in May 2024 and the cumulative ASER amount is $936,883.
- The servicer-reported occupancies and DSCs are: 90.0% / 0.70x (YTD March 2024), 90.0% / 0.78x (FY 2023), 92.0% / 0.58x (FY 2022); at closing these were 93.0% / 1.41x. KBRA's analysis resulted in an estimated loss of $6.4 million (36.6% loss severity) on the whole loan balance of $17.5 million. The loss is based on a KBRA liquidation value of $12.1 million ($119 per sf), which is equal to 80% of the appraisal. The value considers a potentially protracted workout process.
Lantern Square Apartments (4th largest, 17.2%, K-LOC, Underperform, Matured Performing)
- The loan is collateralized by a 212-unit, class-A apartment complex located in Jacksonville, FL. The property is comprised of 88 one-bedroom units, 116 two-bedroom units and eight three-bedroom units. The property is located 2.9 miles west of Jacksonville Executive at Craig Airport and 5.0 miles east of Jacksonville University.
- KBRA identifies the loan as a K-LOC and assigns a KPO of Underperform based on its failure to pay off at scheduled maturity in October 2024. The loan status was adjusted to matured performing during the October 2024 remittance period, however, a 60-day maturity forbearance was simultaneously granted by the servicer. Prior to scheduled maturity, servicer commentary indicated the borrower was under contract to sell the collateral property and the loan was anticipated to pay off.
- The servicer-reported occupancies and DSCs are: 84.0% / 1.11x (YTD June 2024), 83.0% / 1.27x (FY 2023), 91.0% / 1.85x (FY 2022); at closing these were 93.0% / 1.30x. KBRA's analysis resulted in an estimated loss of $1.8 million (11.3% loss severity) on the whole loan balance of $15.5 million. The loss is based on a KBRA liquidation value of $14.2 million ($66,801 per unit). The value is derived from a direct capitalization approach using a KNCF of $1.2 million and a capitalization rate of 8.50%.
Kenwood Place One Office (5th largest, 5.9%, Specially Serviced, K-LOC, Underperform, Matured Non-Performing)
- The loan is collateralized by a 78,491-sf office property in Blue Ash, OH, located approximately 15 miles northeast of the Cincinnati CBD. Built in 2000, the three-story building benefits from access to I-71, a major throughway in the region.
- KBRA maintains the loan as a K-LOC and assigns a KPO of Underperform based on its failure to pay off at scheduled maturity in October 2024. The loan was transferred to the special servicer in September 2024 for imminent monetary default and the loan status was adjusted to matured non-performing during the October 2024 remittance period, however, the special servicer's commentary indicated a potential forbearance is being discussed.
- The servicer-reported occupancies and DSCs are: 72.0% / 0.70x (YTD June 2024), 62.0% / 0.04x (FY 2023), 55.0% / 0.19x (FY 2022); at closing these were 95.0% / 1.62x. KBRA's analysis resulted in an estimated loss of $4.0 million (74.1% loss severity) on the whole loan balance of $5.4 million. The loss is based on a KBRA liquidation value of $2.2 million ($28 per sf). The value is derived from a direct capitalization approach using a KNCF of $196,741 and a capitalization rate of 9.00%.
Westside Plaza (7th largest, 5.2%, K-LOC, Underperform, Matured Performing)
- The loan is collateralized by a 71,431-sf retail property in Orlando, FL, approximately seven miles west of the Orlando CBD.
- KBRA identifies the loan as a K-LOC and assigns a KPO of Underperform based on its failure to pay off at scheduled maturity in October 2024. Although servicer commentary indicated the resolution strategy is to accommodate a forbearance in order to support a refinance of the existing mortgage, a formal forbearance agreement has yet to be disclosed. The loan status was adjusted from matured non-performing to matured performing during the November 2024 remittance period.
- The servicer-reported occupancies and DSCs are: 100.0% / 1.53x (YTD June 2024), 98.0% / 1.37x (FY 2023), 100.0% / 1.51x (FY 2022); at closing these were 93.0% / 1.51x. KBRA's analysis resulted in an estimated loss of $646,097 (13.8% loss severity) on the whole loan balance of $4.7 million. The loss is based on a KBRA liquidation value of $4.4 million ($61 per sf). The value is derived from a direct capitalization approach using a KNCF of $405,197 and a capitalization rate of 9.25%.
Bevo Plaza (8th largest, 2.7%, K-LOC, Underperform, Matured Non-Performing)
- The loan is secured by the borrower fee simple interest in an 8,544-sf retail property in Austin, TX. Built in 1965 and renovated most recently in 2013, the property benefits from its location adjacent to The University of Texas at Austin and I-35.
- KBRA maintains the loan's K-LOC designation and assigns a KPO of Underperform based on its failure to pay off at scheduled maturity in October 2024. The loan status is matured non-performing, however, November 2024 servicer commentary indicated the master servicer has agreed to a 30-day forbearance agreement. A formal forbearance agreement has yet to be disclosed.
- The servicer-reported occupancies and DSCs are: 41.0% / 0.29x (YTD June 2024), 41.0% / -0.06 (FY 2023), 32.0% / 0.58x (FY 2022); at closing these were 100.0% / 1.34x. KBRA's analysis resulted in an estimated loss of $1.1 million (44.4% loss severity) on the whole loan balance of $2.4 million. The loss is based on a KBRA liquidation value of $1.7 million ($61 per sf). The value is derived from a direct capitalization approach using a KNCF of $149,950 and a capitalization rate of 9.00%.
The remaining K-LOC, 1920 Corporate Place (5.8%), does not have an estimated loss. One additional loan, 110 Miller Avenue (3.8%), failed to pay off at maturity and is specially serviced, however, an updated servicer asset status report dated December 5, 2024 indicated the loan has been paid off in full and is expected to be reflected in a future remittance report.
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 asset in the transaction, as well as the continuing magnitude and extent of interest shortfalls on the certificates.
Details concerning the classes with rating changes are as follows:
- Class D to D (sf) from C (sf)
Details concerning the remaining rated classes are as follows:
- Class C affirms the rating of BBB (sf)
- Class PEX Certificates affirms the rating of BBB (sf)
- Class E affirms the rating of D (sf)
- Class F affirms the rating of D (sf)
To access ratings and relevant documents, click here.
Related Publication
Methodologies
- Structured Finance: Global Structured Finance Counterparty Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
- CMBS: North American CMBS Property Evaluation Methodology
- CMBS: North American CMBS Single Borrower & Large Loan Rating Methodology
- ESG Global Rating Methodology