DBRS Limited (Morningstar DBRS) downgraded its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-GC21 issued by Citigroup Commercial Mortgage Trust 2014-GC21 as follows.
Class X-C to B (high) (sf) from BB (high) (sf)
Class E to B (sf) from BB (sf)
Class X-D to C (sf) from B (sf)
Class F to C (sf) from B (low) (sf)
Morningstar DBRS also confirmed its credit ratings on the remaining classes as follows:
Class A-5 at AAA (sf)
Class A-S at AAA (sf)
Class X-A at AAA (sf)
Class B at AA (sf)
Class X-B at A (high) (sf)
Class C at A (sf)
Class PEZ at A (sf)
Class D at BBB (low) (sf)
The trend on Classes C, D, E, X-B, X-C, and PEZ was changed to Negative from Stable. Classes F and X-D have credit ratings that do not generally carry a trend in Commercial Mortgage-Backed Security (CMBS) credit ratings. All other classes have Stable trends.
The credit rating downgrades reflect Morningstar DBRS' concerns regarding a number of loans at increased risk of maturity default. All of the remaining 34 loans in the pool are scheduled to mature in the next six months. While Morningstar DBRS expects the majority will repay from the pool, a concentrated number of loans have either already defaulted or have exhibited increased default risk given declining credit metrics, prior default, or borrower communication indicating a possible modification request. One loan, Greene Town Center (Prospectus ID#3; 8.2% of the pool balance), has already transferred to special servicing following a failure to repay at its December 2023 maturity and is delinquent. An additional seven loans, including the largest loan in the pool, representing 39.1% of the pool balance in aggregate are current on payments but have been identified by Morningstar DBRS to be at risk for maturity default. The Negative trends reflect the potential for Morningstar DBRS' loss projections to increase should these loans default.
As of the January 2024 remittance, 34 of the original 70 loans remain in the trust, with an aggregate balance of $483.1 million, representing a collateral reduction of 53.6% since issuance. Nine loans representing 17.1% of the pool are fully defeased. An additional 17 loans, representing 35.5% of the pool, are current on payments with a weighted-average (WA) debt yield of 11.2% and a WA debt service coverage ratio (DSCR) of 1.60 times (x). There is one loan in special servicing as noted above. Greene Town Center transferred to the special servicer in December 2023 due to maturity default and is past due for the December and January payments. It is secured by an 18 building mixed-use lifestyle center comprising of retail, office, and multifamily space located in Beavercreek, Ohio. According to the servicer, the lender, and borrower are discussing a maturity date extension.
The annualized net cash flow (NCF) was $11.0 million (a DSCR of 1.25x) based on reporting for the trailing nine months (T-9) ended September 30, 2023, compared with the YE2022 figure of $10.7 million (a DSCR of 1.21x) and the Issuer's figure of $13.2 million (a DSCR of 1.50x). Occupancy has remained stable to improving over the life of the loan, most recently reported at 88.6% as of October 2023, down slightly from 91.1% at YE2022 and 88.8% at issuance. Additionally, as per the October 2023 rent roll, 37 leases, representing 22.2% of the total net rentable area (NRA), are scheduled to rollover in the next 12 months within the retail and office portion of the complex. Given the loan's delinquency, uncertain workout strategy. and upcoming rollover, Morningstar DBRS analyzed this loan with a liquidation strategy resulting in a loss severity approaching 25%.
The largest loan in the pool is the Brookfield Properties-sponsored Maine Mall (Prospectus ID#1; 25.9% of the pool), which is secured by a 730,444 square foot (sf) portion of a 1.0 million-sf super-regional mall in Portland, Maine. The mall is anchored by Jordan Furniture Gallery (12.1% of the NRA, lease expiring in July 2030), JCPenney (8.6% of the NRA, lease expiring in July 2028), and a Macy's, which is not collateral for the loan. Another non-collateral anchor space which was previously occupied by Sears remains vacant since the store closed in 2020. The loan is on the servicer's watchlist, being monitored for low DSCR and upcoming maturity in April 2024. In November 2020, the servicer and the sponsor executed a forbearance agreement wherein Brookfield provided rent deferrals to multiple tenants. Although the deferred amounts have been repaid, the mall performance has not rebounded to pre-pandemic levels.
The annualized NCF was $14.8 million (a DSCR of 1.33x) based on reporting for the T-9 ended September 30, 2023, compared with YE2022 NCF of $15.4 million (a DSCR of 1.39x), and well below the Issuer's NCF of $20.3 million (a DSCR of 1.83x). The loan is currently in cash management as the DSCR is below 1.50x. As of November 2023, the loan had a cash trap balance of $10 million. The loan also has a total reserve balance of $16.1 million as per the January 2024 remittance. Although there is cash in reserve, given the property type, secondary market location, year-over-year decline in revenue, and near-term maturity, Morningstar DBRS' analysis considered a stressed value based on a 10% cap rate applied to the YE2022 NCF in the event of default.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (January 23, 2024), https://dbrs.morningstar.com/research/427030.
Classes X-A, X-B, X-C, and X-D are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.
All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023) https://dbrs.morningstar.com/research/410912.
Other methodologies referenced in this transaction are listed at the end of this press release.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
Morningstar DBRS notes that a sensitivity analysis was not performed for this review as the transaction is in its maturity year. In those cases, the Morningstar DBRS credit ratings are typically based on a recoverability analysis for the remaining loans.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.
DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577
The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
North American CMBS Multi-Borrower Rating Methodology (November 3, 2023)/North American CMBS Insight Model v 1.2.0.0, https://dbrs.morningstar.com/research/422859
Rating North American CMBS Interest-Only Certificates (December 13, 2023), https://dbrs.morningstar.com/research/425261)
Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023), https://dbrs.morningstar.com/research/415687 https://dbrs.morningstar.com/research/415687
DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023), https://dbrs.morningstar.com/research/420982
North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592
Legal Criteria for U.S. Structured Finance (December 7, 2023), https://dbrs.morningstar.com/research/425081
A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.
For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
MACY'S, INC. 
