Morningstar DBRS Downgrades Credit Ratings on One Class of COMM 2014-LC17 Mortgage Trust; Changes Trend on Two Classes to Stable From Negative

DBRS Limited (Morningstar DBRS) downgraded its credit rating on one class of Commercial Mortgage Pass-Through Certificates, Series 2014-LC17 issued by COMM 2014-LC17 Mortgage Trust as follows:

-- Class E to CCC (sf) from B (low) (sf)

Morningstar DBRS also confirmed the credit ratings on the following classes:

-- Class X-C at BB (high) (sf)
-- Class D at BB (sf)
-- Class F at CCC (sf)
-- Class G at C (sf)

In addition, Morningstar DBRS changed the trends on Classes D and X-C to Stable from Negative. The remaining classes have credit ratings that do not typically carry a trend in commercial mortgage-backed securities (CMBS) transactions.

The Class E certificate has been accruing interest shortfalls since November 2024 and has reached Morningstar DBRS' maximum tolerance of six remittance periods of consecutive shortfalls for the BB (sf) and B (sf) credit rating categories, supporting the credit rating downgrade to CCC (sf) from B (low) (sf) on that class. According to the April 2025 remittance, the servicer is no longer advancing any interest due to the Class E certificate, as a result of the specially serviced loan concentration. Only seven loans remain in the pool, five of which (representing 78.3% of the current pool balance) are in special servicing, and one of which, Paradise Valley (Prospectus ID#26, 10.8% of the current pool balance) is Real Estate Owned (REO). As of the April 2025 remittance, cumulative unpaid interest totaled $5.3 million, up from $4.3 million at Morningstar DBRS' previous credit rating action in June 2024.

The credit rating confirmation on Classes D, X-C, F, and G are supported by the conservative liquidation scenarios for all specially serviced loans based on stresses to the most recent appraised values to determine the recoverability of the remaining bonds. Based on those liquidation scenarios, Morningstar DBRS is currently projecting a total implied loss of approximately $24.7 million, resulting in a partial principal write-down of over 50% for the CCC (sf) rated Class F certificate and a complete write-down of the C (sf) rated Class G certificate and nonrated Class H certificate. Morningstar DBRS' recoverability analysis suggests a full recovery of the principal balance on the Class D certificate is likely, supporting the credit rating confirmations and trend changes on that Class and the corresponding notional Class X-C, to Stable from Negative.

Since the last credit rating action in June 2024, 24 loans have successfully repaid in full from the trust. As of the April 2025 remittance, the current trust balance was $116.0 million, representing a collateral reduction of 90.6% from issuance. The remaining two loans that are not specially serviced, U-Haul Pool (Prospectus ID#9, 10.1% of the current pool balance) and Highwoods Portfolio (Prospectus ID#24, 11.7% of the current pool balance) have extended maturity dates in September 2029. To date, the trust has incurred losses of approximately $35.9 million, depleting more than 95% of the nonrated Class H certificate.

The largest specially serviced loan, Parkway 120 (Prospectus ID#5, 33.7% of the current pool balance) is secured by a 221,664-square-foot, five-story suburban office building in central New Jersey. The loan failed to repay at its initial maturity date in September 2024 and was subsequently transferred to the special servicer later that month. According to the most recent servicer commentary, a notice of default was sent to the borrower, and foreclosure proceedings have been initiated. The special servicer continues to gather information and discuss alternative workout strategies deemed appropriate. According to the December 2024 rent roll, the subject property was 91.2% occupied, a slight decline from 96.0% at YE2023 but in line with the YE2022 figure of 91.0%. The largest tenants include K. Hovnanian (28.1% of NRA, lease expiry in June 2028), Fragomen, Del Ray, Bernsen (21% of NRA, lease expiry in August 2026), and Tata Communications (7.4% of NRA, lease expiry in March 2029). Over the next 12 months there is a marginal tenant rollover concern as leases representing only 2.0% of the NRA are scheduled to expire. Financial performance continues to decline; according to the most recent financial reporting as of YE2024, the loan reported a debt service coverage ratio (DSCR) of 1.18 times (x), compared with the YE2023 and YE2022 figures of 1.25x and 1.33x, respectively. The property generated $3.3 million of net cash flow in 2024, a decline of approximately 13.0% from the issuance figure. According to REIS, the Central New Jersey office market had a vacancy rate of 19.4% as of Q1 2025. At issuance, the subject property was valued at $60 million, and although a new appraisal has yet to be made available, Morningstar DBRS expects that the collateral's as-is value has declined significantly from issuance given the softening office submarket fundamentals, in-place cash flow declines and suburban location of the asset. Morningstar DBRS' analysis for the loan included a liquidation scenario based on a 60% haircut to the issuance appraised value. Inclusive of the outstanding advances and expected servicer expenses, the resulting loan loss severity was almost 50% or approximately $20 million.

The second-largest specially serviced loan is Aloft Cupertino (Prospectus ID#6; 28.5% of the pool). The loan is secured by a 123-key, limited-service hotel in Cupertino, California. The subject is approximately a half-mile from Apple's 1 Infinite Loop office. The loan failed to repay at its August 2024 maturity date and was subsequently transferred to the special servicer. According to the most recent servicer commentary, the borrower has agreed to pay off the loan subject to waivers. The expected closing date was April 4; however, the borrower had a one-time extension option of 30 days available to them. According to the Smith Travel Report (STR) for the trailing 12 month period (T-12) ended December 31, 2024, the subject property reported an occupancy rate, average daily rate (ADR), and revenue per available room (RevPAR) of 73.9%, $201.56, and $149.03, respectively with a RevPAR penetration figure of 126.5%. The subject property is also outperforming its competitive set in terms of occupancy and ADR. At issuance, the property was valued at $48.6 million, which did increase to $54 million in December 2021 and then declined to $39.7 million as of September 2024, representing an overall decline of approximately 27% since issuance. Morningstar DBRS' analysis for the loan included a liquidation scenario based on a 20.0% haircut to the September 2024 appraisal. Inclusive of the outstanding advances and expected servicer expenses, the resulting loan loss severity was almost 5.0% or approximately $1.5 million.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
There were no Environmental, Social, or 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 Factors in Credit Ratings (August 13, 2024): https://dbrs.morningstar.com/research/437781

Class X-C is an interest-only (IO) certificate that references 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 (February 28, 2025): https://dbrs.morningstar.com/research/448963

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

DBRS Limited
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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 (April 9, 2025)/North American CMBS Insight Model v 1.3.0.0: https://dbrs.morningstar.com/research/451739
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024): https://dbrs.morningstar.com/research/439702
-- Legal and Derivatives Criteria for Canadian Structured Finance (August 12, 2024):
https://dbrs.morningstar.com/research/437761
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024):
https://dbrs.morningstar.com/research/438283

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.