Approximately $950.4 million of structured securities affected
New York, September 14, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on ten classes and downgraded ratings on two classes
in WFRBS Commercial Mortgage Trust 2014-C24, Commercial Mortgage
Pass-Through Certificates Series 2014-C24.
Cl. A-3, Affirmed Aaa (sf); previously on Sep
14, 2018 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Sep
14, 2018 Affirmed Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on Sep
14, 2018 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Sep
14, 2018 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aa1 (sf); previously on Sep
14, 2018 Affirmed Aa1 (sf)
Cl. B, Affirmed Aa3 (sf); previously on Sep 14,
2018 Affirmed Aa3 (sf)
Cl. C, Downgraded to Baa2 (sf); previously on Sep 14,
2018 Affirmed A3 (sf)
Cl. PEX**, Downgraded to A2 (sf); previously
on Mar 18, 2019 Upgraded to Aa3 (sf)
Cl. SJ-A***, Affirmed Aa2 (sf); previously
on Sep 14, 2018 Affirmed Aa2 (sf)
Cl. SJ-B***, Affirmed A2 (sf); previously
on Sep 14, 2018 Affirmed A2 (sf)
Cl. SJ-C***, Affirmed Baa1 (sf);
previously on Sep 14, 2018 Affirmed Baa1 (sf)
Cl. SJ-D***, Affirmed Ba2 (sf); previously
on Sep 14, 2018 Affirmed Ba2 (sf)
** Reflects exchangeable classes
*** Reflects rake bond classes
RATINGS RATIONALE
The ratings on six pooled P&I classes, Cl. A-3
through Cl. B, 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 rating on one pooled P&I class, Cl. C, was
downgraded due to a decline in pool performance and higher anticipated
losses from specially serviced and troubled loans. The largest
specially serviced loan is secured by an office property in Houston that
represents over 9% of the pool and is now real estate owned ("REO").
The ratings on four non-pooled rake classes, Cl. SJ-A,
SJ-B, SJ-C and SJ-D, were affirmed based
on the key metrics of their referenced loan, including Moody's loan
to value (LTV) ratio. The rake classes are supported by the subordinate
debt associated with the St. John's Town Center loan.
The rating on the exchangeable class, Cl. PEX, was
downgraded due to decline in the credit quality of its 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 11.1%
of the current pooled balance, compared to 6.5% at
Moody's last review. Moody's base expected loss plus realized
losses is now 9.9% of the original pooled balance,
compared to 6.2% 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 rake bond classes was "Approach to Rating US and Canadian
Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187.
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 principal methodology used in rating rake bond classes was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875.
Please see the list of ratings at the top of this announcement to identify
which classes are exchangeable classes (indicated by the **) and
rating rake bond 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 August 17, 2020 distribution date, the transaction's
aggregate pooled certificate balance has decreased by 12.5%
to $951.0 million from $1.088 billion at securitization.
The certificates are collateralized by 73 mortgage loans ranging in size
from less than 1% to 10.9% of the pool, with
the top ten loans constituting 50.8% of the pooled loan
balance. Six loans, constituting 6.3% of the
pool, have defeased and are secured by US government securities.
One loan, constituting 10.9% of the pooled balance,
has an investment-grade structured credit assessment.
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 22,
compared to 26 at Moody's last review.
As of the August 17, 2020 remittance report, loans representing
79.8% were current or within their grace period on their
debt service payments, 0.8% were beyond their grace
period but less than 30 days delinquent, 0.5% were
between 30 -- 59 days delinquent, 2.1% were 60
-- 89 days delinquent and 16.8% were greater than 90
days delinquent or REO.
Twelve loans, constituting 15.0% 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 realized loss of $2.4
million (for a loss severity of 84%). Ten loans, constituting
21.5% of the pool, are currently in special servicing.
Six of the specially serviced loans, representing 10.5%
of the pool, have transferred to special servicing since March 2020.
The largest loan in special servicing is the Two Westlake Park Loan ($88.2
million -- 9.3% of the pool), which
is secured by a 450,000 SF office building located in Houston,
Texas. The property was developed in 1982 and primarily consists
of a 17-story office tower and a seven-story parking garage
located within the Energy Corridor/West Katy Freeway office submarket
of Houston, Texas. The property is part of a larger complex
known as WestLake Park, which contains approximately 2.3
million SF of Class A office space. The loan transferred to special
servicing in July 2018 due to imminent monetary default. The property's
performance declined significantly in recent years after the two largest
tenants at securitization, ConocoPhillips (46.0% of
the NRA; lease expiration November 2019) and BP (36.2%
of the NRA; lease expiration in June 2017), vacated at or prior
to their initial lease expiration dates. The property has not backfilled
its vacant space and the property was only 6% leased as of December
2019. According to CBRE, the Katy Freeway Class A office
submarket had a vacancy of 20.5% in Q2 2020. The
property became REO in June 2020 and is being listed for sale.
Due to the property's distressed occupancy and the high submarket
office vacancy, Moody's anticipates a significant loss on
this loan.
The second largest loan in special servicing is Bend River Promenade ($25.8
million -- 2.7% of the pool), which is secured
by a 252,147 SF retail center located in Bend, Oregon.
The loan transferred to special serving in April 2020 in relation to the
coronavirus outbreak and is last paid through its April 2020 payment date.
The property was performing well prior to 2020 with an occupancy of 96%
and actual NOI DSCR of 1.84X as of year-end 2019.
The largest tenants include Macy' (40% of NRA; lease
expiration in January 2024); Hobby Lobby (25%; lease
expiration in January 2026 and TJ Maxx (11%; lease expiration
in May 2021). The special servicer is currently discussing potential
resolution options with the borrower.
The next largest loan was secured by a parking facility within the Philadelphia
International Airport (2.3% of the pool) which transferred
due to hardships associated with the coronavirus pandemic. The
remaining seven specially serviced loans are primarily secured primarily
by retail properties.
Moody's has also assumed a high default probability for two poorly performing
loans, constituting 1.6% of the pool, and has
estimated an aggregate loss of $79.4 million (38%
expected loss on average) from these troubled loans and specially serviced
loan.
Moody's received full year 2019 operating results for 97% of the
pool and partial year 2020 operating results for 68% of the pool.
Moody's weighted average conduit LTV is 104%, compared to
102% 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 16% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.8%.
Moody's actual and stressed conduit DSCRs are 1.79X and 1.10X,
respectively, the same as 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 loan with a structured credit assessment is the St. Johns Town
Center Loan ($103.5 million -- 9.7%
of the pooled balance), which is secured by a 981,000 SF component
of a 1.4 million SF super-regional outdoor mall located
in Jacksonville, Florida. The loan represents a pari passu
interest in a $203.5 million senior loan. The property
is also encumbered by a $146.5 million B-note which
contribute to the transaction as non-pooled rake bonds.
The loan sponsor is a joint venture between subsidiaries of Simon Property
Group (SPG), Inc. and Deutsche Bank Asset & Wealth Management
with SPG managing the property. The mall is anchored by Dillard's,
Target, Dick's Sporting Goods, Ashley Furniture, and
Nordstrom. Dillard's, Target and Ashely Furniture are not
part of the collateral and own their own spaces. As of March 2020,
the property was 88% occupied, compared to 95% as
of December 2019, and 98% in December 2018. Overall
performance has improved since securitization with reported year-end
2019 NOI increasing to $36.8 million from $31.3
million at securitization. The property is considered the dominant
mall in the area and the loan was current as of the August 2020 remittance
date. Moody's structured credit assessment and stressed DSCR on
the pooled portion are aaa (sca.pd) and 1.61X, respectively,
the same as at last review. The Moody's total debt LTV including
the B-note was 86.4%.
The top three conduit loans represent 18% of the pool balance.
The largest loan is the Gateway Center Phase II Loan ($75.0
million -- 7.9% of the pool), which
represents a pari passu portion of a $300 million mortgage loan.
The loan is secured by a 602,000 SF retail center located in Brooklyn,
New York. The center is the second phase of a larger retail power
center. As of December 2019, the property was 100%
leased, unchanged from securitization. Retailers at the property
include JC Penney (which owns their improvements and leases the land from
the borrower), ShopRite, and Burlington Coat Factory.
The JC Penney location has not been included in any of the recent store
closure announcements. JC Penney represents 20% of the total
property's square footage but less than 5% of the base rental
revenue. Through year-end 2019 the property performance
has improved since securitization and revenue has continued to increase
over the past three years. The loan is interest-only throughout
the loan term. The loan was current as of its August 2020 payment
date and Moody's LTV and stressed DSCR are 114% and 0.78X,
respectively, the same as at the last review.
The second largest loan is the Crossings at Corona Loan ($66.6
million -- 7.0% of the pool), which is secured
by an 834,000 SF component of an approximately 962,200 SF
power center located 50 miles south-east of Los Angeles in Corona,
California. The center is anchored by a Kohl's, Edwards Cinemas
(Regal) and Best Buy and is also shadow anchored by a Target. As
of December 2019, the property was 81% leased, compared
to 86% as of December 2018 and 97% at securitization.
Toys R Us (7.6% of the NRA) closed in April 2018 in conjunction
with the bankruptcy of the company. As a result, the loan
is on the servicer's watchlist due to low DSCR (NCF DSCR of 1.08X)
and low occupancy. The loan is current as of the August 2020 payment
date and Moody's LTV and stressed DSCR are 140% and 0.73X,
respectively, compared to 130% and 0.77X at Moody's
last review.
The third largest loan is the CTO NNN Portfolio Loan ($30.0
million -- 3.2% of the pool), which is secured
by six single tenant retail properties, located in six states,
totaling 266,764 SF. The properties are leased to six tenants;
Lowes, Harris Teeter, Rite Aid, Walgreens, and
Big Lots. The loan is interest-only throughout the loan
term. Property performance has been stable since securitization
and Moody's LTV and stressed DSCR are 103% and 0.99X,
respectively, the same as at the 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.
Dariusz Surmacz
Vice President - Senior 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
Matthew Halpern
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
