Fitch Affirms COMM 2014-277P

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed all classes of COMM 2014-277P Mortgage Trust commercial mortgage pass-through certificates. A full list of rating actions follows at the end of this ratings action commentary.

KEY RATING DRIVERS

The affirmations reflect stable property performance since issuance. Based on Fitch's surveillance analysis, which uses the same framework that was set out at issuance, the loan's performance metrics have remained relatively unchanged since issuance.

The loan, which represents a debt of $422 per square foot (psf), has a Fitch stressed debt service coverage ratio and loan-to-value of 1.35x and 64.7%, respectively, compared to 1.33x and 65.9% at issuance. Fitch's stressed net cash flow (NCF) of $81.1 million, compared to $79.6 million at issuance, is based upon leases in place as of the April 2016 rent roll with a contractual rent bump credit given through January 2017 and straight-lined rents of the contractual rent bumps of investment-grade tenants through the earlier of their lease term and the loan's August 2024 anticipated repayment date (ARD).

As of the April 2016 rent roll, the property was 95.2% occupied, representing an improvement from 91.8% one year earlier, which was primarily attributed to two new leases executed during the first half of 2016. Tenants with investment-grade credit ratings account for 81% of the total property square footage. The two largest tenants, JPMorgan Chase Bank (JPM; 70% of total square footage; rated 'A+') and Sumitomo Mitsui Banking Corp. (Sumitomo; 9.4% of total square footage; rated 'A'), occupy nearly 80% of the total property square footage. JPM subleases greater than 40% of its leased space to multiple subtenants.

Approximately 86% of the total square footage rolls prior to the loan's August 2024 ARD, although the majority of the rollover is associated with the two largest tenants, both of which roll in 2021. JPM is required to provide 18 months' advance notice of renewal under its lease; otherwise, a cash flow sweep will occur 12 months prior to JPM's roll or notice of nonrenewal, capped at $40 million, for re-tenanting costs.

In-place rents average approximately $90 per occupied sf, as of the April 2016 rent roll. According to REIS and as of first quarter 2016, submarket vacancy and asking rents for class A office space in the Grand Central submarket was 7.5% and $86.87 psf, respectively.

The transaction certificates, which follow a sequential-pay structure, represent the beneficial interests in the mortgage loan securing the fee interest in 277 Park Avenue, a 51-story, 1.78 million sf class A office building located in the Grand Central submarket of Midtown Manhattan. Loan proceeds were used to refinance existing first mortgage and mezzanine debt, fund up-front reserves, and pay defeasance and closing costs. Non-recourse carveouts, including fraud, waste and misappropriation, are limited to the special purpose entity borrower. The loan is sponsored by the estate of Stanley Stahl.

The loan is interest-only (annual interest rate of 3.624%) prior to its 10-year ARD of Aug. 6, 2024. Should the loan not pay off by the ARD, the interest rate will increase to higher of the in-place rate plus 350 bps (7.124%) or the 10-year swap rate on the ARD plus 450 bps, with at least 80% of excess cash flow applied to pay down principal.

RATING SENSITIVITIES

All classes maintain Stable Outlooks. No rating actions are expected unless there are material changes in property occupancy or cash flow. Property performance remains consistent with issuance.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following ratings:

COMM 2014-277P Mortgage Trust Commercial Mortgage Pass-Through Certificates

--$570 million class A at 'AAAsf'; Outlook Stable;

--$84 million class B at 'AA-sf'; Outlook Stable;

--$68 million class C at 'A-sf'; Outlook Stable;

--$28 million class D at 'BBB+sf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Related Research

COMM 2014-277P Mortgage Trust -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754988

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008824

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008824

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160713006212/en/

Fitch Ratings
Primary Analyst
Melissa Che
Director
+1-212-612-7862
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Britt Johnson
Senior Director
+1-312-606-2341
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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