DBRS Upgrades Three Classes and Confirms Six Classes of LSTAR Commercial Mortgage Trust 2014-2

DBRS Limited (DBRS) has today upgraded the following three classes of Commercial Mortgage Pass-Through Certificates, Series 2014-2 issued by LSTAR Commercial Mortgage Trust 2014-2:

-- Class X-B to AA (high) (sf) from AA (sf)
-- Class B to AA (sf) from AA (low) (sf)
-- Class C to A (sf) from A (low) (sf)

Additionally, DBRS has confirmed the ratings on the following classes:

-- Class A-2 at AAA (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class X-A at B (high) (sf)
-- Class G at B (sf)

Classes B, X-B and C were also assigned Positive trends, with all other trends Stable.

The rating upgrades and Positive trend assignments reflect the transaction’s healthy overall performance that includes significant collateral reduction since issuance. As of the April 2017 remittance, there has been a collateral reduction of 42.9% as a result of loan prepayments and loan liquidations, as 93 of the original 208 loans have paid out of the trust ahead of their respective maturity dates. According to the most recent reporting available, the remaining loans in the pool have a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.24 times (x) and 8.4%, respectively. The transaction is concentrated as the largest three loans represent 56.2% of the current pool balance. According to the YE2016 financials, these loans have a WA DSCR of 1.40x and debt yield of 9.5%.

The three largest remaining loans in the pool were newly originated at issuance, while the other 112 loans are seasoned loans that were purchased by the loan seller from Fannie Mae or were originally part of the now retired LASL 2006-MF2 and LASL 2006-MF3 commercial mortgage-backed securities (CMBS) transactions. The three largest loans are individually secured by an office property, a student housing property and a hotel property, while the seasoned loans are all secured by multifamily and manufactured housing community properties. The seasoned loans are granular within the transaction as the largest represents 1.6% of the current pool balance. Of the remaining seasoned loans, 104 loans, representing 41.5% of the current pool balance, are fully amortizing.

As of the April 2017 remittance, there are two loans in special servicing and eight loans on the servicer’s watchlist, representing 1.1% and 4.7% of the current pool balance, respectively. The loans on the servicer’s watchlist have been flagged because of items of deferred maintance or a decrease in financial performance since issuance. The loans in special servicing were each transferred as a result of payment default.

DBRS has provided updated loan-level commentary and analysis for the largest three loans in the pool and the two specially serviced loans in the DBRS CMBS IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log in to DBRS CMBS IReports at www.ireports.dbrs.com.

The ratings assigned to Classes C, D, E, F and G materially deviate from the higher ratings implied by the quantitative model. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative model that is a substantial component of a rating methodology; in this case, the assigned ratings that reflect the sustainability of loan performance trends were not demonstrated.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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 to the right under Related Research or by contacting us at info@dbrs.com.
This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.