Press Release|CMBS

KBRA Affirms All Ratings for WFCM 2014-LC16

5 Feb 2025 | New York

KBRA affirms all of its outstanding ratings for WFCM 2014-LC16, a $66.0 million CMBS conduit transaction, which has five 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, which reflected an increase in KBRA’s estimated losses and interest shortfalls as the servicer works through the resolution of the remaining assets. However, the magnitude of the increases does not warrant rating adjustments at this time. As of the January 2025 remittance period, all remaining assets are specially serviced after failing to pay off at their respective maturity dates, of which, one (7.9%) is in foreclosure. The details of the remaining five assets are outlined below.

Harlequin Plaza (largest, 42.4%, Specially Serviced, K-LOC, Underperform)

The loan is collateralized by a 329,926 sf, Class-B office complex located in Greenwood Village, Colorado, approximately 10 miles south of Denver. The development consists of two Energy Star certified buildings.
KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on recent status in foreclosure, which was changed to non-performing during the December 2024 remittance period. The loan transferred to the special servicer in May 2024 after the borrower failed to secure refinancing prior to loan maturity in June 2024. Pursuant to the October 2024 rent roll, inclusive of additional leasing updates, the property was 68.4% occupied, which is down from 82.1% at last review, and 87.7% at closing. The decline in occupancy can be attributed to the downsizing of the former largest tenant, Guild Mortgage Company (3rd largest, 14.3% of base rent, 9.0% of collateral sf), by 38,658 sf (10.7%) upon its lease expiration in November 2024. Additionally, lease rollover through YE 2026, represents 42.6% of base rent and 26.6% of collateral sf, primarily stemming from the upcoming December 2025 lease expiration of Businesssolver.com, Inc. (2nd largest, 17.7% of base rent, 11.0% of collateral sf). In October 2024, a foreclosure sale date was scheduled for early February 2025. The judge requested the servicer’s foreclosure filing to be refiled which has been completed, however, they are currently unsure if the foreclosure will still take place in February 2025 as they are awaiting a signed Rule 120 Order.
An appraisal dated June 2024 valued the property at $17.2 million ($52 per sf), representing a 63.2% decline from the $46.6 million value at issuance ($141 per sf). The servicer reported occupancies and DSCs are: 74.0% / 1.35x (FY 2023); 86.2% / 1.34x (FY 2022); at issuance these were 88.6% and 2.30x. KBRA's analysis resulted in an estimated loss of $14.0 million (49.9% estimated loss severity) on the loan balance of $28.0 million. The loss is based on a KBRA liquidation value of $14.7 million ($45 per sf). The value is derived from a direct capitalization approach using a KNCF of $1.9 million and a capitalization rate of 10.00%, resulting in a value of $19.2 million, which was then adjusted downward by $4.5 million to account for projected lease up costs inclusive of potential lease rollover through YE 2026.

Orchard Falls (2nd largest, 24.5%, Specially Serviced, K-LOC, Underperform)

The loan is collateralized by a 146,276 sf, Class-B office building located in Greenwood Village, Colorado, approximately 11 miles southeast of the Denver CBD.
KBRA maintains the loan’s K-LOC designation and its KPO of Underperform based on its status with the special servicer after the loan failed to pay off at its scheduled May 2024 maturity date. Pursuant to the April 2024 rent roll, the property was 90.1% leased, which is unchanged from last review and compares to 94.0% at closing. Lease rollover through YE 2025, inclusive of MTM leases, represents 48.5% of base rent and 44.0% of collateral sf across 12 leases, including three of the largest five leases. These include National Bank Holdings (largest, 35.5% of base rent, 32.6% of collateral sf), Cohen Veterans Network Inc. (4th largest, 5.7%, 4.7%) and Hair Club for Men, LLC (5th largest, 4.6%, 4.1%).
An updated appraisal dated June 2024 valued the property at $4.8 million ($32 per sf). The most recent appraisal represents an 81.8% decline relative to the $26.1 million ($178 per sf) appraisal at origination. The servicer reported occupancies and DSCs are: 90.1% / 0.90x (YTD September 2023); 79.4% / 0.74x (FY 2022); at issuance these were 94.0% and 1.33x. KBRA's analysis resulted in an estimated loss of $12.6 million (78.0% estimated loss severity) on the loan balance of $16.1 million. The loss is based on a KBRA liquidation value of $3.8 million ($26 per sf). The value is derived from a direct capitalization approach using a KNCF of $452,305 and a capitalization rate of 12.00%.

Residence Inn Grapevine (3rd largest, 16.5%, Specially Serviced, K-LOC, Underperform)

The loan is collateralized by a 133-key full-service hotel in Grapevine, Texas, located approximately 20 miles northwest of the Dallas CBD and three miles north of the DFW International Airport.
KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on its non-performing status with the special servicer after the loan failed to pay off at its scheduled April 2024 maturity date. Subsequently in May 2024, the borrower had signed a pre-negotiation letter and indicated intentions to sell the property. In December 2024, it was reported that the borrower had selected a proposed buyer and, in January 2025, the borrower had signed a PSA and expected to repay the loan in full, with closing expected by the end of the month. Research indicates the property is currently under contract to sell at a purchase price of $22.5 million and according to the special servicer, the sale is anticipated to close in early February 2025.
An updated appraisal May 2024 valued the property at $21.0 million ($157,895 per key), representing a 6.3% decrease from the $22.4 million value at issuance ($168,421 per key). The servicer reported occupancies and DSCs are: 83.7% / 1.74x (FY 2023); 85.8% / 1.26x (FY 2022); at issuance these were 84.5% and 1.55x. At this time, KBRA does not estimate a loss on this asset which has a loan balance of $10.9 million.

Bayou Place Phase I (4th largest, 8.6%, Specially Serviced, K-LOC, Underperform)

The loan is collateralized a 179,764 sf entertainment complex in Houston, TX, located within the Theater District in close proximity to several entertainment establishments including Jones Hall for the Performing Arts, Wortham Theater Center, Alley Theater and the Hobby Center for the Performing Arts.
KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on its non-performing status with the special servicer after the borrower failed to secure refinancing prior to its scheduled May 2024 maturity date. The failure to secure refinancing was in part due to the potential that the subject’s largest tenant, Live Nation (38.2% of base rent, 33.4% of collateral sf) would vacate the property at its December 2026 lease expiration, however, it was reported in September 2024 that the tenant extended its lease for an additional 20 years. As a result, while the servicer dual tracks foreclosure, the borrower is again working toward refinancing and expected to close on the funding by the end of January 2025. At this time, the special servicer is unaware of the current status of the potential refinance.
An appraisal dated September 2024 valued the property at $22.0 million ($122 per sf), representing a 7.3% increase from the $20.5 million value at issuance ($114 per sf). The servicer reported occupancies and DSCs are: 89.6% / 2.04x (FY 2023); 93.0% / 1.86x (FY 2022); at issuance these were 97.2% and 2.20x. At this time, KBRA does not estimate a loss on this asset, which has a loan balance of $5.7 million.

Barstow Shopping Center (5th largest, 7.9%, Foreclosure, K-LOC, Underperform)

The loan is collateralized by a 110,100 sf anchored retail center in Barstow, California, located approximately 100 miles northeast of the Los Angeles CBD.
KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on its foreclosure status with the special servicer after the borrower failed to secure refinancing prior to its scheduled May 2024 maturity date. It was reported that the borrower was near securing refinancing in July 2024, when the subject’s former largest tenant by footprint, 99 Cents Only Store (6.9% of base rent, 12.1% of collateral sf), vacated the subject three months after filing for Chapter 11 bankruptcy. As a result of the departure, the potential refinancing and sale fell through, and the special servicer has been dual tracking workout discussions and foreclosure with the borrower. Pursuant to the September 2024 rent roll, the collateral was 18.1% leased, which is down from 38.0% at YE 2023 and 87.9% at issuance.
An appraisal dated July 2024 valued the property at $4.7 million ($43 per sf), representing a 41.3% decrease from the $8.0 million value at issuance ($73 per sf). The servicer reported occupancies and DSCs are: 38.0% / 0.96x (FY 2023); 71.3% / 1.40x (FY 2022); at issuance these were 87.9% and 1.52x. KBRA's analysis resulted in an estimated loss of $1.3 million (25.6% estimated loss severity) on the loan balance of $5.2 million. The loss is based on a KBRA value of $4.0 million ($37 per sf). The value is derived from a direct capitalization approach using a stabilized KNCF of $576,365 and a capitalization rate of 10.50%, which resulted in a value of $5.5 million ($50 per sf), and was then adjusted downward by $1.5 million to account for projected lease up costs and income lost during the stabilization period.

Ratings 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

CMBS: WFCM 2014-LC16 Pre-Sale Report

KBRA Affirms All Ratings for WFCM 2014-LC16

Ratings Sensitivities

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Methodologies