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KBRA Downgrades All Outstanding Ratings for COMM 2014-CCRE17

28 Feb 2025   |   New York

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KBRA downgrades all outstanding ratings for COMM 2014-CCRE17, a $257.4 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 all six remaining assets since KBRA's last ratings adjustment in March 2022. Additionally, the downgrades also considers the likelihood of interest shortfalls reaching higher in the capital structure as the special servicer resolves the remaining loans.

There are six assets remaining in the transaction, all of which are past maturity. The largest, 25 Broadway (49.1% of pool balance) executed a 24-month forbearance through July 2026. Of the other remaining assets, two are listed as REO (11.3%), one is in foreclosure (4.2%), one (32.5%) is matured non-performing and one (2.9%) is matured performing.

Details concerning the classes with ratings changes are as follows:

  • Class B to A (sf) from AA- (sf)
  • Class C to BBB (sf) from A- (sf)
  • Class PEZ to BBB (sf) from A- (sf)
  • Class D to B (sf) from BBB- (sf)
  • Class E to CCC (sf) from BB- (sf)
  • Class F to CC (sf) from CCC (sf)
  • Class G to C (sf) from CC (sf)

The details of the assets are outlined below.

25 Broadway (largest, 49.1%, K-LOC, 30+ days delinquent)

  • The loan is collateralized by a 956,554 sf, 22-story, Class-B, landmark office building located in downtown New York City. The loan matured in April 2024.
  • KBRA maintains the loan's K-LOC designation based on the recent execution of a maturity forbearance. The lender denied the borrower's request for an extension in January 2024 and the loan subsequently transferred to special servicing in March. A 24-month forbearance was executed and commenced in July 2024, with an option to further extend another six months subject to additional terms. In addition to forbearance fees, the borrower was required to make a $7.0 million principal curtailment and an additional $4.0 million is expected at the beginning of the second year of the forbearance term. According to the February 2025 remittance, the whole loan balance was paid down by $7.0 million to a whole loan balance of $243.0 million, of which $126.3 million is in this transaction.
  • The servicer-reported NCF for FY 2023 was $19.5 million, representing a 15.9% decrease from $22.6 million underwritten by the issuer at closing. According to the June 2024 rent roll, the property was 89.0% leased, compared to 91.5% at last review and 95.8% at closing. The largest tenants include Léman Manhattan Preparatory School ("Léman", 21.5% of base rent) and Teach for America (19.9%), which account for 41.4% of the total base rent. Per special servicer, Léman continues to be in payment default under its lease since June 2023. Léman was in discussions with an investor for cash investment in June 2024 and in concurrent discussions with borrower to amend its lease. The terms remain subject to negotiations with the tenant, however it is likely that additional rent concessions will occur if a lease is signed. Since last review, base rent for the tenant declined by 28.1% to $6.4 million from $8.9 million. Léman's lease is scheduled to expire in September 2030.
  • The servicer reported occupancies and DSCs are: 92.0% / 1.64x (FY 2023), 92.0% / 1.70x (FY 2022); at closing these were 95.8% / 1.90x. As of the February 2025 remittance, the loan balance became 30+ days delinquent. An appraisal dated July 2024 valued the property at $284.0 million ($299 per sf), which is 23.0% below the $369.0 million ($388 per sf) value at issuance. KBRA’s analysis resulted in an estimated loss of $34.2 million (14.1% estimated loss severity), on the whole loan balance of $243.0 million. The loss is based on a KBRA liquidation value of $210.9 million ($222 per sf). The value considers a distressed non-stabilized disposition of the asset.

Cottonwood Mall (2nd largest, 32.5%, K-LOC, Matured Non-Performing)

  • The loan is collateralized by 410,452 sf of a 1.1 million sf, enclosed super-regional mall (C+ ranking by Green Street) located in Albuquerque, New Mexico. The collateral includes 321,885 sf of in-line retail space, a food court and a 16-screen movie theater. The mall is currently anchored by Conn’s Home Plus, Dillard’s and JCPenney. Each of the anchors own their respective improvements and the underlying land and are not included as collateral for the subject loan. The loan matured in April 2024.
  • KBRA maintains the loan’s K-LOC designation due to its maturity default and the loan's status with the special servicer. The loan was transferred to the special servicer in July 2021 due to the loan's sponsor, Washington Prime Group (WPG), having filed for bankruptcy. A receiver was appointed in February 2022. Per the special servicer, the receiver was successful in converting temporary tenants to permanent and is currently addressing leases expiring in the next 12 months.
  • For the TTM period ending May 2024, comparable in-line sales, as calculated by KBRA were $343 per sf, down from $370 per sf at last review, and up from securitization ($330 per sf). The largest tenant, Regal Cinemas (17.9% of total base rent), generated sales for the same periods of $343,204 per screen, compared to $378,591 per screen at last review, and down from $405,000 per screen at issuance.
  • The servicer-reported occupancies and DSCs are: 88.0% / 0.90x (YTD June 2024), 90.0% / 0.92x (FY 2023), 94.0% / 1.22x (FY 2022); at closing these were 96.0% / 1.89x. An appraisal dated November 2023 valued the property at $100.0 million ($244 per sf), which is 42.9% below the $175.0 million ($426 per sf) value at issuance. KBRA's analysis resulted in an estimated loss of $30.7 million (36.6% estimated loss severity) on $83.8 million loan balance. The loss is based on a KBRA liquidation value of $56.0 million ($132 per sf). The value considers a distressed non-stabilized disposition of the asset.

Crowne Plaza Houston River Oaks (3rd largest, 8.3%, K-LOC, REO)

  • The asset is a 354-key, full-service hotel in Houston, Texas, approximately five miles southwest of the CBD. The loan matured in May 2024.
  • KBRA maintains the loan's K-LOC designation due to the asset's REO status. The loan was initially reported delinquent in June 2020 and transferred to the special servicer the following month. In October 2020, the asset was reported to be closed due to COVID-19. A receiver for the property was appointed in May 2021. Per special servicer commentary, the lender took title as REO on February 4, 2025.
  • The servicer-reported occupancies and DSCs are: 39.0% / -0.53x (YTD June 2024), 28.0% / -0.91x (TTM September 2023), 15.0% / -1.10x (FY 2022); at closing these were 80.2% / 1.52x. An appraisal dated July 2024 valued the property at $27.5 million ($77,684 per key), which is 25.7% below the $37.0 million ($104,520 per key) value at issuance. KBRA's analysis resulted in an estimated loss of $12.9 million (60.2% estimated loss severity), on the whole loan balance of $21.5 million. The loss is based on a KBRA liquidation value of $19.5 million ($55,085 per key). The value considers a distressed non-stabilized disposition of the asset as well as comparable market values.

Deerpath Plaza (4th largest, 4.2%, K-LOC, Foreclosure)

  • The loan is collateralized by a 47,192 sf, mixed-use office/retail property in Lake Forest, Illinois, approximately 32 miles north of the Chicago CBD. The loan matured in January 2024.
  • KBRA maintains the loan’s K-LOC designation based on maturity default and the loan's foreclosure status. A foreclosure complaint was filed in February 2021 and a receiver for the property was signed in June 2021. The receiver has since been working on leasing the property and has been able to increase occupancy to 80.0% as of September 2024 by retaining existing tenants, as well as executing new leases. Per special servicer, the foreclosure sale was completed in January 2025. Title will officially transfer when the judge approves the sale, which is expected within three weeks of the sale date.
  • The servicer-reported occupancies and DSCs are: 80.0% / 0.78x (YTD September 2024), 79.0% / 0.51x (YTD September 2023), N/A / 0.49x (FY 2022); at closing these were 96.1% / 1.40x. An updated appraisal dated October 2024 valued the property at $8.1 million ($172 per sf) which is a 55.2% decline from $18.1 million ($382 per sf) at issuance. KBRA’s analysis resulted in an estimated loss of $6.1 million (56.6% estimated loss severity), on a whole loan balance of $10.7 million. The loss is based on a KBRA liquidation value of $6.6 million ($140 per sf). The value considers a distressed non-stabilized disposition of the asset.

Kunkel Portfolio (5th largest, 3.0%, K-LOC, REO)

  • The portfolio consists of four properties, Kunkel Square, which is a multifamily property, and three office properties, Fendrich Plaza, the Court Building, and the Hulman Building. The loan matured in May 2024.
  • KBRA maintains the asset's K-LOC designation based on its REO status. The asset was initially transferred to the special servicer in July 2017 due to imminent default. The lender is the winning bidder at the foreclosure sale in February 2021. The REO properties were marketed for sale in the first quarter of 2022, and the lender sold two of the four properties, the Court and Hulman Buildings. Special servicer continues to evaluate optimizing the sale of the remaining two properties and is in the process of engaging a broker to put the two properties back on the market.
  • The servicer-reported occupancies and DSCs are: 84.0% / 0.18x (YTD March 2024), 84.0% / 0.20x (FY 2023), 84.0% / 0.33x (FY 2022); at closing these were 95.0% / 0.74x. An updated appraisal dated March 2024 valued the portfolio of the remaining two properties at $7.0 million which compares to the $9.9 million at issuance. KBRA’s analysis resulted in an estimated loss of $4.6 million (60.2% estimated loss severity), on the whole loan balance of $7.6 million. The loss is based on a KBRA liquidation value of $4.9 million ($140 per sf). The value considers a distressed non-stabilized disposition of the asset.

Dundalk Village (6th largest, 2.9%, K-LOC, Matured Performing)

  • The loan is collateralized by a 117,000 sf, mixed-use property consisting of 63,000 sf of retail space, 67 multifamily apartments units, and 9,231 sf of office space located in Dundalk, Maryland, approximately 10 miles east of the Baltimore CBD. The loan matured in April 2024.
  • KBRA maintains the loan's K-LOC designation based on the loan's maturity default. Per special servicer, the borrower negotiated a short term forbearance in April 2024 to facilitate the sale of the asset. However, the sale fell through at closing, due to the purchaser's inability to secure requisite funds to effectuate the purchase. In June 2024, the borrower presented the special servicer with an executed term sheet for a full loan payoff via refinance with an expected closing date in August 2024 and requested another short term forbearance to facilitate the refinance. However, this execution never closed either. Following the failed refinance attempt, the borrower listed the asset for sale via Alex Cooper Auction House in September 2024. The auction listing only received a single bid, which was less than the unpaid principal balance and therefore the sale never executed. As a result, special servicer has indicated intentions of pursuing a dual resolution strategy that would include but not be limited to continuing forbearance discussions with the borrower and pursuing foreclosure and the appointment of a receiver.
  • According to the September 2024 rent rolls, the multifamily portion was 94.0% occupied and the retail/office portion was 78.4% leased, resulting in an average occupancy of 86.2%. Lease rollover through YE 2025, inclusive of MTM leases, represent 28.2% of total base rent and is spread across 20 leases, the largest of which represents 4.1% of base rent with a lease expiring in September 2025.
  • The servicer-reported occupancies and DSCs are: N/A / 0.75x (YTD September 2024), 64.0% / 1.21x (FY 2023), 85.0% / 1.03x (FY 2022); at closing these were 91.0% / 1.38x. An updated appraisal dated June 2024 valued the portfolio of the remaining two properties at $9.6 million ($82 per sf), which is down by 23.2% from $12.5 million ($107 per sf) at issuance. KBRA’s analysis resulted in an estimated loss of $1.9 million (25.1% estimated loss severity), on the whole loan balance of $7.5 million. The loss is based on a KBRA liquidation value of $5.8 million ($50 per sf). The value considers a distressed non-stabilized disposition of the asset.

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

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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