NEW YORK--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on Deutsche Bank Securities, Inc.'s COMM 2014-CCRE18 Commercial Mortgage Trust Pass-Through Certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$47,076,000 class A-1 'AAAsf'; Outlook Stable;
--$139,682,000 class A-2 'AAAsf'; Outlook Stable;
--$53,600,000 class A-SB 'AAAsf'; Outlook Stable;
--$20,350,000 class A-3 'AAAsf'; Outlook Stable;
--$195,000,000 class A-4 'AAAsf'; Outlook Stable;
--$241,730,000 class A-5 'AAAsf'; Outlook Stable;
--$758,464,000a class X-A 'AAAsf'; Outlook Stable;
--$61,026,000b class A-M 'AAAsf'; Outlook Stable;
--$58,535,000b class B 'AA-sf'; Outlook Stable;
--$165,641,000b class PEZ 'A-sf'; Outlook Stable;
--$46,080,000b class C 'A-sf'; Outlook Stable;
--$158,169,000a,c class X-B 'BBB-sf'; Outlook Stable;
--$53,554,000c class D 'BBB-sf'; Outlook Stable;
--$26,153,000c class E 'BB-sf'; Outlook Stable.
(a) Notional amount and interest only.
(b) Class A-M, B and C certificates may be exchanged for class PEZ certificates, and class PEZ certificates may be exchanged for class A-M, B, and C certificates.
(c) Privately placed and pursuant to Rule 144A.
The expected ratings are based on information provided by the issuer as of June 16, 2014. Fitch does not expect to rate the $79,707,247 interest-only class X-C certificates the $23,664,000c class F or $29,890,247 class G certificates.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 49 loans secured by 60 commercial properties having an aggregate principal balance of approximately $996 million, as of the cutoff date. The loans were contributed to the trust by Cantor Commercial Real Estate Lending, L.P., German American Capital Corporation, Ladder Capital Finance LLC, and Natixis Real Estate Capital LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 71.8% of the properties by balance, cash flow analysis of 82.7%, and asset summary reviews on 82.6% of the pool.
KEY RATING DRIVERS
Concentrated Pool: The 10 largest loans represent 57.5% of the total pool balance, which is higher than the average 2013 top 10 concentration of 54.5%.
High Leverage: The pool's Fitch DSCR and LTV of 1.14x and 110.5%, respectively, are worse than the 1st quarter 2014 averages of 1.18x and 104.7%, respectively.
Diverse Property Type Mix: The pool has a good mix of property types, with retail as the largest property type at 23.7%, followed by multifamily at 18.3%, mixed-use at 18.2%, office at 12.6% and hotel at 12.2%. There are 13 retail properties. None of the retail properties are malls. The retail properties consist of a mix of anchored and unanchored shopping centers.
Limited Amortization: The pool is scheduled to amortize by 11.7% of the initial pool balance prior to maturity. Three loans (16.4%), including the largest loan, are full-term interest only, and 20 loans (47.3%) are partial interest only. Fitch rated transactions in the 1st quarter of 2014 had an average full-term interest only percentage of 15.8% and a partial interest only percentage of 37.6%. This transaction has a lower than average amount of full-term interest only but a higher amount of partial interest only.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 11.5% below the most recent NOI (for properties that a recent NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans, and could result in potential rating actions on the certificates. Fitch evaluated the sensitivity of the ratings assigned to COMM 2014-CCRE18 certificates and found that the transaction displays slightly above average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB+sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 75 - 76.
The master servicer will be KeyBank National Association, rated 'CMS1' by Fitch. The special servicer will be Rialto Capital Advisors, LLC, rated 'CSS2-'.
Criteria Application
Fitch property-level cash flow analysis, modeling assumptions, and application of Fitch mortgage constants and cap rates were generally consistent with Fitch Research on 'Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions,' dated Aug. 7, 2013, available on Fitch's website at www.fitchratings.com. Updates to the published criteria were applied as follows:
--For non-pari passu full-term IO conduit loans in this transaction, the FC-DSCR is weighted 33.3% FT-DSCR and 66.7% FK-DSCR. In addition, amortization credit has been increased for all amortizing loans. This criteria update is based on recent regression testing which demonstrated a more significant difference in the performance of amortizing versus interest-only loans.
--The confidence interval for the 'AAAsf' rating category has been increased from 99.990% to 99.995% and the confidence interval for the 'AAsf' rating category has been decreased from 99.920% to 99.880%. This criteria update is based on an examination of tranche thickness and implied loss coverage multiples as they compare to other structured finance sectors.
An updated version of the Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions containing a detailed description and examples of the updates mentioned above is anticipated to be published in June 2014. The presale report is available at 'www.fitchratings.com'.
Additional Information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions' (Aug. 7, 2013);
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'Rating Criteria for U.S. Commercial Mortgage Servicers' (Feb. 14, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014).
Applicable Criteria and Related Research: COMM 2014-CCRE18 Mortgage Trust
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750296
Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715757
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821
Rating Criteria for U.S. Commercial Mortgage Servicers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961
Counterparty Criteria for Structured Finance and Covered Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=834847
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