Approximately $989.6 million of structured securities affected
New York, November 18, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on seven classes and downgraded the ratings on three
classes in WFRBS Commercial Mortgage Trust 2014-C21, Commercial
Mortgage Pass-Through Certificates Series 2014-C21 as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Sep
17, 2019 Affirmed Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on Sep
17, 2019 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Sep
17, 2019 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Sep
17, 2019 Affirmed Aaa (sf)
Cl. A-SBFL, Affirmed Aaa (sf); previously on
Sep 17, 2019 Affirmed Aaa (sf)
Cl. A-SBFX, Affirmed Aaa (sf); previously on
Sep 17, 2019 Affirmed Aaa (sf)
Cl. B, Downgraded to A1 (sf); previously on Sep 17,
2019 Affirmed Aa3 (sf)
Cl. C, Downgraded to Baa2 (sf); previously on Sep 17,
2019 Affirmed A3 (sf)
Cl. PEX**, Downgraded to A2 (sf); previously
on Sep 17, 2019 Affirmed A1 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Sep 17, 2019 Affirmed Aaa (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
RATINGS RATIONALE
The ratings on six P&I classes were affirmed because the transaction's
key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on two P&I classes were downgraded due to anticipated
losses from specially serviced and troubled loans. Specially serviced
loans now represent 12% of the pool, all of which are more
than 90 days delinquent or in foreclosure. The two largest specially
serviced loans, are secured by a regional mall (3.9%
of the pool) and a Manhattan hotel (3.6%) that have exhibited
declines in performance prior to 2020. In total, retail and
hotel properties represent 18% and 15% of the pool,
respectively.
The rating on the IO class was affirmed based on the credit quality of
the referenced classes.
The rating on the exchangeable class was downgraded due to the credit
quality of the referenced exchangeable classes.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. Stress on commercial real estate
properties will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and declines
in foot traffic and sales for non-essential items at retail properties.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Moody's rating action reflects a base expected loss of 9.6%
of the current pooled balance, compared to 5.2% at
Moody's last review. Moody's base expected loss plus realized
losses is now 8.0% of the original pooled balance,
compared to 4.5% at the last review. Moody's
provides a current list of base expected losses for conduit and fusion
CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. Performance
that falls outside the given range can indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant
amount of loan paydowns or amortization, an increase in the pool's
share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the pool, loan concentration, an increase
in realized and expected losses from specially serviced and troubled loans
or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except exchangeable
classes and interest-only classes was "Approach to Rating
US and Canadian Conduit/Fusion CMBS" published in September 2020 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778.
The principal methodology used in rating exchangeable classes was "Moody's
Approach to Rating Repackaged Securities" published in June 2020
and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1230078.
The methodologies used in rating interest-only classes were "Approach
to Rating US and Canadian Conduit/Fusion CMBS" published in September
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179.
Please see the list of ratings at the top of this announcement to identify
which classes are interest-only (indicated by the *) and exchangeable
classes (indicated by the **). Alternatively, please
see the Rating Methodologies page on www.moodys.com for
a copy of these methodologies.
DEAL PERFORMANCE
As of the October 15, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 17.7% to
$1.17 billion from $1.42 billion at securitization.
The certificates are collateralized by 109 mortgage loans ranging in size
from less than 1% to 7.7% of the pool, with
the top ten loans (excluding defeasance) constituting 46% of the
pool. Fifteen loans, constituting 7.0% of the
pool, have defeased and are secured by US government securities.
The pool contains 15 low leverage cooperative loans, constituting
4.6% of the pool balance, that were too small to credit
assess; however, have Moody's leverage that is consistent with
other loans previously assigned an investment grade Structured Credit
Assessments.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity.
Loan concentration has an important bearing on potential rating volatility,
including the risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 30,
compared to 33 at Moody's last review.
As of the October 2020 remittance report, loans representing 85%
were current or within their grace period on their debt service payments,
3% were beyond their grace period but less than 30 days delinquent
and 12% were beyond 90 days delinquent.
Thirty-five loans, constituting 35.7% of the
pool, are on the master servicer's watchlist. The watchlist
includes loans that meet certain portfolio review guidelines established
as part of the CRE Finance Council (CREFC) monthly reporting package.
As part of Moody's ongoing monitoring of a transaction, the
agency reviews the watchlist to assess which loans have material issues
that could affect performance.
One loan has been liquidated from the pool with a realized loss of $1.6
million (a loss severity of 24%). Six loans, constituting
12.0% of the pool, are currently in special servicing.
Five of the specially serviced loans, representing 11.4%
of the pool, have transferred to special servicing since March 2020.
The largest specially serviced loan is the Montgomery Mall Loan ($46.0
million -- 3.9% of the pool), which represents
a pari-passu portion of a $100 million first mortgage loan.
The loan is secured by an approximately 580,000 square feet (SF)
component of a 1.1 million SF regional mall in North Wales,
Pennsylvania, a northern suburb of Philadelphia. The property
is currently anchored by Macy's, JC Penney, Wegmans,
and Dick's Sporting Goods. One anchor space (169,000 SF)
is now vacant following the February 2020 closure of Sears. As
of December 2019, the total mall and the inline space were 87%
and 72% occupied, respectively, compared to 92%
and 67% as of December 2018. However, total mall occupancy
falls to 71% accounting for the Sears vacancy. Property
performance had deteriorated through year-end 2019 and the 2019
NOI was approximately 26% lower than in 2014. The property
benefits from an infill location 20 miles northwest of Philadelphia,
however, competition exists from six competitive regional and super
regional centers located within a 20 miles radius of the property.
The property was temporarily closed from March 14th to June 26th as a
result of the coronavirus pandemic and the loan transferred to special
servicing in June 2020 due to imminent default. The loan is last
paid through its May 2020 payment date. The sponsor, Simon
Property Group (Simon), is unwilling to inject additional funds
into loan but is continuing to manage property and a cash lockbox is being
implemented.
The second largest specially serviced loan is the Tryp by Wyndham Times
Square South Loan ($41.7 million -- 3.6%
of the pool), which is secured by the fee simple interest in a select-service
hotel known as the Wyndham Tryp Times Square South, located on West
35th Street between 8th and 9th Avenues in New York, New York.
The property was initially developed in 1926 as light industrial and office
space. In 2001, the sponsor acquired the property and spent
the subsequent ten years obtaining the required zoning change to convert
the improvements into the existing hotel which opened in February 2012.
The existing improvements are 15-stories tall and offer common
area amenities that include 1,835 SF of meeting space, library,
and a fitness center. The cost of the gut-renovation was
approximately $45.2 million ($261,000 per key).
The property was the first Wyndham Tryp branded hotel in the United States
and was among 97 worldwide as of December 2019. Property performance
has deteriorated since securitization; 2019 NOI was approximately
$3.85 million, compared to $6.05 million
in 2014. The loan transferred to special servicing in April 2020
for imminent monetary default and a PNA has been signed.
The third largest specially serviced loan is The Bluffs Loan ($25.9
million -- 2.2% of the pool), which is secured
by a class A garden-style apartment complex located in Junction
City, Kansas, approximately 65 miles west of Topeka and 130
miles west of Kansas City. The complex was built from 2007 to 2009
and consists of 21 three-story buildings. Common amenities
include a resident lounge with game room, theater, banquet
room, swimming pool, hot tub, children's play
areas, basketball courts, and a 24-hour fitness center.
From 2007-2013, average vacancy was 10%, however
vacancy has ranged from 16% - 32% since securitization.
The property was 74% occupied as of December 2019. Two separate
fires impacted two buildings (58 units); due to market conditions,
the borrower requested insurance proceeds be used to pay down the loan
balance versus rebuild the damaged units. Restoration net proceeds
of $5.7 million were applied as a one time principal pay
down in January 2018. The loan transferred to special servicing
in May 2020 for imminent default, and a receiver was appointed in
July 2020.
The remaining three specially serviced loans are secured by a mix of property
types. Moody's has also assumed a high default probability
for three poorly performing loans, constituting 1.9%
of the pool. Moody's estimates an aggregate $76.5
million loss for the specially serviced and troubled loans (47%
expected loss on average).
Moody's received full year 2019 operating results for 89% of the
pool, and partial year 2020 operating results for 58% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 107%, compared to 108%
at Moody's last review. Moody's conduit component excludes
loans with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's net cash
flow (NCF) reflects a weighted average haircut of 19% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 1.51X and 1.03X,
respectively, compared to 1.53X and 1.02X at the last
review. Moody's actual DSCR is based on Moody's NCF
and the loan's actual debt service. Moody's stressed
DSCR is based on Moody's NCF and a 9.25% stress rate
the agency applied to the loan balance.
The top three conduit loans represent 20.4% of the pool
balance. The largest loan is the Fairview Park Drive Loan ($90
million -- 7.7% of the pool), which
is secured by a 360,000 square feet (SF) office building located
in Falls Church, Virginia. The collateral consists of a 15-story
class A office building and an adjacent 5-story parking garage
and is part of a 220-acre master planned office development called
Fairview Park. As of June 2020, the property was 40%
occupied compared to 97% in June 2019 and 86% at securitization.
At securitization, the property served as the global headquarters
for its largest tenant, General Dynamics (170,380 SF or 47%
of the net rentable area (NRA)), however, the tenant has announced
plans to move its corporate headquarters to Reston. The tenant's
lease expired in March 2019, but remained in occupancy through October
2019. The lender approved a lease to replace most of the vacated
space (135,000 SF) with BAE Systems Inc., where the
space will again serve as a corporate headquarters. The loan is
interest only for its entire term and Moody's LTV and stressed DSCR are
137% and 0.69X, respectively, unchanged from
Moody's last review.
The second largest loan is the Queens Atrium Loan ($88.2
million -- 7.5% of the pool), which
represents a pari-passu portion of a $176 million mortgage
loan. The loan is secured by a 1.03 million SF office building
located in Long Island City, New York. The collateral consists
of two buildings that are 100% leased, almost entirely by
New York City agencies. The properties are within a ten minute
walk of the Court Square and Queens Plaza subway stops. The loan
has passed its initial 5-year interest only period and has amortized
2.0%. Moody's LTV and stressed DSCR are 115%
and 0.87X, respectively, compared to 117% and
0.86X at Moody's last review.
The third largest loan is the Highland Portfolio Loan ($60.4
million -- 5.2% of the pool), secured
by six multifamily properties containing a total of 1,873 units,
all located in Michigan (Clinton Township, Roseville, Warren,
and Southfield). The improvements were built in the 1970s and the
1980s and have undergone various degrees of updates since construction.
All properties offer a mix of one, two, and three-bedroom
units as well as a variety of common amenities including swimming pools,
tennis courts, on-site laundry facilities, and covered
parking. The portfolio was 87% leased as of March 2020.
The loan has passed its initial 5-year interest only period and
has amortized 3.1%. Moody's LTV and stressed DSCR
are 113% and 0.89X, respectively, compared to
115% and 0.87X at Moody's last review.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rhett Terrell
Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Romina Padhi
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
