Press Release|CMBS

KBRA Downgrades Five Ratings and Affirms All Other Ratings for MSBAM 2014-C16

6 Mar 2025 | New York

KBRA downgrades five ratings and affirms all other outstanding ratings for MSBAM 2014-C16, a $228.4 million CMBS conduit transaction. The rating actions follow a surveillance review of the transaction. The downgrades are driven by an increase in KBRA's estimated losses on five of the assets since KBRA's last review in March 2024. Additionally, the downgrades also consider the likelihood of interest shortfalls reaching higher in the capital structure.

As of the February 2025 remittance period, there are nine assets remaining in the transaction, all of which have been identified as K-LOCs. Seven of the K-LOCs (96.3%) have estimated losses. Of the remaining assets, three are listed as matured non-performing (21.6% of the loan pool), one is listed as REO (8.9%), and one is listed as foreclosure (2.3%).

State Farm Portfolio (largest, 37.6%, K-LOC, Underperform, Current)

The loan is collateralized by a 14 Class-A and Class-B suburban office buildings located in 11 states.
KBRA maintains the loan's K-LOC designation and KPO of Underperform based on collateral occupancy concerns and prior status with the special servicer. The loan transferred to the special servicer in September 2023 for non-monetary default. This came after reports that State Farm, the sole tenant, would be vacating all the remaining occupied buildings securitized in the portfolio, effectively dropping physical occupancy to 10.0%. A mitigating concern, however, is that the majority of State Farm's leases expire in November 2028, and the tenant has continued to meet its rental obligations at the properties vacated in the portfolio. Furthermore, State Farm does not have any lease termination options. According to the servicer, a Third Amendment to the Loan Agreement was finalized authorizing the release of the Tulsa, Oklahoma property and the proceeds applied to the loan. The loan returned to the master servicer during the February 2025 remittance period.
The loan had an Anticipated Repayment Date (ARD) of April 2024 and a stated maturity date of April 2029. The loan required interest-only debt service payments through the ARD with interest accruing at a fixed rate of 4.63%. From and after April 11, 2024, interest in excess of the Regular Interest Rate has been deferred and excess cash flow applied, pro-rata, to each of the notes evidencing the loan, first to reduce the outstanding principal balance and thereafter to pay the deferred interest. As of February 2025, the loan has been paid down by 14.7%.
The servicer-reported occupancies and DSCs are 91.5% / 1.30x (YTD Sept 2024), 94.0% / 2.06x (FY 2023), 100% / 2.06x (FY 2022); at closing these were 100% / 2.02x.
KBRA’s analysis resulted in an estimated loss of $71.2 million (21.8% estimated loss severity) on the whole loan balance of $327.2 million. The loss is based on a KBRA liquidation value of $257.1 million ($75.66 per sf). The value is derived from a direct capitalization approach using a KNCF of $23.1 million and a capitalization rate of 9.00%

Outlets of Mississippi A/B (2nd largest, 27.1%, K-LOC, Underperform, Watchlist)

The loan is collateralized by a 300,156-sf, open-air retail outlet-center located in Pearl, MS, approximately four miles southeast of the CBD of Jackson, MS. Built in 2013, the property covers approximately 37 acres and offers over 1,390 parking spaces.
KBRA maintains the loan's K-LOC designation and it's KPO of Underperform based on the collateral's deteriorating financial performance, the loan's modification, and its prior status with the special servicer. The loan transferred to special servicing in November 2018 due to imminent monetary default and subsequently became 90+ days delinquent in August 2019.

A loan modification creating an A/B structure closed on December 31, 2020. According to the terms of the modification agreement, the principal balance of the loan was severed into two separate tranches; an A tranche in the amount of $28.0 million and a B tranche in the amount of $33.7 million. Upon disposition, after the A note is paid in full, the remaining funds will be split 50%/50% between the borrower and the B note holder. In addition, the maturity date of the loan was extended until June 2026. The loan is current as of February 2025.
The servicer-reported occupancies and DSCs are 90.5% / 0.27x (YTD September 2024), 94.0% / 0.60x (FY 2023), 89.0% / -1.15x (FY 2022); at closing these were 95.0% / 1.56x. An appraisal dated February 2021 valued the property at $17.0 million, which represents an 81.4% decrease from its $91.8 million value at securitization. The loan carries a cumulative ASER amount of $1.0 million. The loan is current and requires amortizing debt service payments. It carries a $1.2 million WODRA resulting in the transaction's collateral balance being lower than the total bond balance.
KBRA’s analysis resulted in an estimated loss of $53.9 million (87.4% estimated loss severity) on the whole loan balance of $61.7 million. The loss is based on a KBRA liquidation value of $8.96 million ($29.86 per sf). The value is derived from a direct capitalization approach using a KNCF of $829,011 and a capitalization rate of 9.25%

Hilton San Francisco Financial District (3rd largest, 17.8%, K-LOC, Underperform, Matured Non-performing)

The loan is a 26-story, 543-key, full-service hotel located in the Financial District of San Francisco, California. The hotel was developed on a 0.8-acre site in 1970 and was operated as a Holiday Inn until 2006, when it was converted to a Hilton Hotel by the sponsor at a total cost of $55.0 million ($101,000 per key). Additionally, between 2008 and 2013, the sponsor spent $13.6 million ($25,131 per key) to add a wine bar, install new carpets, upgrade the guestrooms, bathrooms, and windows, and make structural and building enhancements. Additionally, between 2008 and 2013, the sponsor spent $13.6 million ($25,131/key) to upgrade the hotel.
KBRA maintains the loan's K-LOC designation and KPO of Underperform due to the loan's failure to pay off at maturity date and its specially serviced status. The loan was transferred to the Special Servicer in October 2023 for imminent default as the borrower indicated they would not be able to pay off the loan at its maturity in January 2024. The loan did not pay off and a short-term forbearance was granted. It later expired and the borrower was sent a default notice and notice was sent to the mezzanine lender. The workout strategy is reported to be a modification.
The servicer-reported occupancies and DSCs are 84.0% / 1.96x (YTD September 2024), 83.0% / 0.96x (FY 2023), 85.0% / 1.09x (FY 2022); at closing these were 90.2% / 1.63x. The collateral property is outperforming its competitive set in occupancy and RevPAR but not ADR, according to the October 2024 STR report. The report identifies eight properties within its competitive set. An appraisal dated March 2024 valued the property at $167.0 million ($307,551 per key), which represents a 7.1% decrease from its $179.8 million ($331,123 per key) value at securitization.
KBRA’s analysis resulted in an estimated loss of $1.6 million (3.9% estimated loss severity) on the whole loan balance of $75.4 million. The loss is based on a KBRA liquidation value of $74.7 million ($138,000 per key). The value is derived from a direct capitalization approach using a KNCF of $5.94 million and a capitalization rate of 10.25%

Cascade Station I & II (4th largest, 9.0%, K-LOC, Underperform, REO)

The loan is collateralized by a 127,718 sf office property located in Portland, Oregon, approximately 10 miles northeast of the city’s CBD. The property was developed on a 7.2-acre site by the previous owner, and is comprised of two LEED Gold certified buildings: a two-story single-tenant building constructed in 2008 known as Cascade Station I and a four-story multi-tenant building constructed in 2009 known as Cascade Station II. The asset offers 534 surface parking spaces.
KBRA maintains the loan's K-LOC designation and KPO of Underperform due to its REO status with the special servicer . The assets issues stem from occupancy and financial performance declines. Occupancy fell to 61.0% in December 2023 after Wells Fargo Bank (previously occupying 39% of the space) vacated following its lease expiration in November 2023. As of September 2024, the occupancy across the two properties was 32.0%, this decline was due to Vetsource (formerly 27% of the GLA) vacating the subject following its lease expiration in April 2024
The servicer-reported occupancies and DSCs are 32.0% / 0.27x (YTD September 2024), 61.0% / 2.10x (FY 2023), 100% / 2.03x (FY 2022); at closing these were 93.0% / 1.42x. An appraisal dated September 2024 valued the property at $18.2 million ($143 per sf), which represents a 39.2% decrease from its $30.0 million ($235 per sf) value at securitization. An ARA was applied to the loan on December 12, 2024 and the cumulative ASER amount is $17,452.
KBRA’s analysis resulted in an estimated loss of $5.82 million (28.5% estimated loss severity) on the whole loan balance of $20.4 million. The loss is based on a KBRA liquidation value of $15.6 million ($122.10 per sf). The value is derived from a direct capitalization approach using a KNCF of $1.76 million and a capitalization rate of 9.25%

53 Cardinal Drive (5th largest, 2.6%, K-LOC, Underperform, Matured Non-performing)

The loan is collateralized by a 48,114-sf suburban office property located in Westfield, NJ, approximately 11 miles southwest of downtown Newark, NJ. The subject was constructed in 1987 and benefits from its location just south of U.S. Route 22.
KBRA identified this loan as a K-LOC based on the loan’s failure to pay off at its June 2024 maturity date and subsequent transfer to special servicing. The subject is 100% leased by Lindabury, McCormick, Estabrook & Cooper, P.C. (Lindabury, 100%) pursuant to a lease scheduled to expire in December 2025. As of January 2025, the entire building is available for sublease on LoopNet and the indicated property is under contract for sale. The borrower has signed a PNL, and according to the servicer, the lender will delay the receivership request to allow the borrower to pursue a sale that would result in a full payoff. The lender will dual track foreclosure while continuing workout discussions.
The servicer-reported occupancies and DSCs are 100.0% / 1.07x (YTD September 2024), 61.0% / 2.10x (FY 2023), 100% / 1.66x (FY 2022); at closing these were 90.0% / 1.39x. An appraisal dated September 2024 valued the property at $3.9 million ($81 per sf), which represents a 59.8% decrease from its $9.7 million ($202 per sf) value at securitization. An ARA of $2.5 million was applied to the loan on December 12, 2024.
KBRA’s analysis resulted in an estimated loss of $2.9 million (50.2% estimated loss severity) on the whole loan balance of $5.84 million. The loss is based on a KBRA liquidation value of $3.34 million ($69.38 per sf). The value is derived from a direct capitalization approach using a KNCF of $308,781 and a capitalization rate of 9.25%

Carlisle Medical Center (7th largest, 2.3%, K-LOC, Underperform, Matured Non-performing)

The loan is a 46,768-sf of medical office space located in Carlisle, PA. The subject consists of multiple addresses situated in close proximity to the UPMC Carlisle Hospital. The 16,000-sf 3 Alexandra Court is a two-story standalone medical office building constructed in approximately 1993.
KBRA identified this loan as a K-LOC and KPO of underperform due to the loan's failure to pay off at its June 2024 maturity date and subsequent transfer to special servicing. A foreclosure complaint was filed on August 27, 2024 and the borrower indicated that it would not stipulate to the foreclosure and the appointment of Receiver.
The servicer-reported occupancies and DSCs are 51.7% / 0.68x (YTD March 2024), 45.0% / 0.44x (FY 2023), 53.0% / 0.93x (FY 2022); at closing these were 94.0% / 1.41x. An appraisal dated August 2024 valued the property at $4.0 million ($46 per sf) which represents a 54% decrease from its $8.8 million ($188 per sf) value at securitization. An ARA of 1.6 million was applied to the loan on December 12, 2024. The cumulative ASER amount is $6,359.
KBRA’s analysis resulted in an estimated loss of $1.5 million (28.3% estimated loss severity) on the whole loan balance of $5.15 million. The loss is based on a KBRA liquidation value of $3.98 million ($85.07 per sf). The value is derived from a direct capitalization approach using a KNCF of $413,811 and a capitalization rate of 9.50%

Details concerning the classes with ratings changes are as follows:

Class C to BBB- (sf) from BBB (sf)
Class D to CCC (sf) from B (sf)
Class E to CC (sf) from CCC (sf)
Class F to C (sf) from CC (sf)
Class PST to BBB- (sf) from BBB (sf)

Rating Sensitivities

Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as, the magnitude and extent of interest shortfalls, if any, on the certificates.

To access ratings and relevant documents, click here.

Related Publication

CMBS: MSBAM 2014-C16 Pre-Sale Report