KBRA Downgrades One Rating and Affirms All Other Ratings for COMM 2014-UBS2
11 Jul 2025 | New York
KBRA downgrades the rating of the Class D certificates to C (sf) from CC (sf) and affirms all other outstanding ratings of COMM 2014-UBS2, a $79.1 million CMBS conduit transaction. The rating actions follow a surveillance review of the transaction, of which all four remaining assets in the pool are with the special servicer. The rating actions reflect an increase in both realized losses and KBRA’s estimated losses since last review. In addition, the ratings consider an increase in interest shortfalls, which are affecting all rated certificates with a cumulative total of $6.8 million.
As of the June 2025 remittance period, three (89.2% of the pool balance) of the four remaining assets are REO and one (10.8%) is in foreclosure. The details of the assets are outlined below.
One North State Street (largest, 59.9%, REO)
- The asset is a 129,715 sf of retail space and 40,792 sf of storage space of a 16-story, 713,423 sf office building located in downtown Chicago, Illinois.
- KBRA maintains the asset’s K-LOC designation and KPO of Underperform based on its REO status. The loan transferred to the special servicer in April 2024 and became REO in August 2024 following a foreclosure sale. For the FY 2023, the servicer reported an NCF of $2.8 million, which represents a 43.5% decrease from securitization ($4.9 million). A February 2025 operating statement showed a further decline in financial performance, largely due to decreases in base rent coupled with increases in operating expenses. The largest tenants, TJ Maxx (41.1% of collateral sf) and Burlington (35.2%) each extended their leases at the subject, but the leases were converted to a gross percentage rent basis.
- An appraisal dated December 2024 valued the asset at $13.5 million ($70 per sf), which represents an 86.6% decrease from the $101.0 million ($592 per sf) appraised value at securitization. As a result, the asset carries an ARA of $40.7 million, resulting in a cumulative ASER of $1,443,062.
- The servicer-reported occupancies and DSCs are: 93.9% / 0.75x (FY 2023), 93.0% / 1.03x (FY 2022); at closing these were 98.0% / 1.33x. KBRA's analysis resulted in an estimated loss of $43.8 million (92.6% estimated loss severity) on the outstanding balance of $47.3 million. The loss is based on a KBRA liquidation value of $8.3 million ($49 per sf). The value is derived from a direct capitalization approach using a KNCF of $790,617 and a capitalization rate of 9.50%.
Avnet Building (2nd largest, 16.4%, REO)
- The asset is a 132,070 sf Class A office building located in Tempe, Arizona, which is 100% vacant.
- KBRA maintains the asset’s K-LOC designation and KPO of Underperform based on REO status. The loan was added to the servicer's watchlist in March 2023 as a result of the single tenant, Avnet, not renewing its lease which expired in January 2024. The loan transferred to the special servicer in July 2023 due to imminent default due to cash flow issues. The trust took title in April 2024.
- An appraisal dated September 2024 valued the asset at $7.8 million ($59 per sf), which is 65.5% below the property’s $22.6 million ($171 per sf) value at issuance. As a result, the asset carries an ARA of $6.6 million, resulting in a cumulative ASER of $74,801.
- KBRA’s analysis resulted in an estimated loss of $6.8 million (52.3% estimated loss severity) on an outstanding balance of $12.9 million. The loss is based on a KBRA liquidation value of $7.8 million ($59 per sf). The value is derived from a direct capitalization approach using a KNCF of $1.2 million and a capitalization rate of 10.25%. KBRA adjusted this value downward by $3.7 million to account for TI/LC costs and income lost during the stabilization period.
300 East 23rd Street (3rd largest, 13.0%, REO)
- The asset is a 11,145 sf single-tenant retail property located in New York City's borough of Manhattan, which is now 100% vacant following Duane Reade’s departure in May 2020.
- KBRA maintains the asset’s K-LOC designation and KPO of Underperform based on REO status. The loan was transferred to special servicing in June 2023 due to imminent default and the trust took title in July 2024.
- An appraisal dated December 2024 valued the asset at $3.8 million ($341 per sf), which is 77.1% below the property’s $16.6 million ($1,489 per sf) value at issuance. As a result, the asset carries an ARA of $7.9 million, resulting in a cumulative ASER of $203,733.
- KBRA’s analysis resulted in an estimated loss of $5.6 million (54.7% estimated loss severity) on an outstanding balance of $10.2 million. The loss is based on a KBRA liquidation value of $6.6 million ($592 per sf). The value is derived from a direct capitalization approach using a KNCF of $713,399 and a capitalization rate of 8.50%. KBRA adjusted this value downward by $1.8 million to account for TI/LC costs and income lost during the stabilization period.
Turnpike Square (4th largest, 10.8%, Foreclosure)
- The loan is collateralized by a 105,461 sf, anchored retail property located in Milford, Connecticut, approximately 10 miles southwest of New Haven.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on a decline in collateral performance and foreclosure status with the special servicer. The loan transferred to the special servicer during the January 2024 remittance period for imminent default as the borrower failed to pay off the loan at maturity in February 2024. As of the December 2024 rent roll, the property is 43.6% leased following the former largest tenant, Big Lots, rejecting its lease in bankruptcy.
- An appraisal dated April 2025 valued the asset at $9.1 million ($86 per sf), which is 40.9% below the property’s $15.4 million ($146 per sf) value at issuance. As a result, the asset carries an ARA of $363,247 million, resulting in a cumulative ASER of $6,330.
- KBRA’s analysis resulted in an estimated loss of $3.1 million (35.8% estimated loss severity) on a loan balance of $8.5 million. The loss is based on a KBRA liquidation value of $6.4 million ($60 per sf) which is equal to 70.0% of the appraisal. The value considers a potentially protracted workout process/difficulty in stabilizing the property.
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
Methodologies
- Structured Finance: Global Structured Finance Counterparty Methodology
- CMBS: North American CMBS Property Evaluation Methodology
- CMBS: North American CMBS Single Borrower & Large Loan Rating Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
- ESG Global Rating Methodology