News Column

Fitch to Rate COMM 2014-277P Commercial Mortgage P-T Certs; Presale Issued

August 4, 2014

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has issued a presale report on COMM 2014-277P Mortgage Trust commercial mortgage pass-through certificates.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

-- $570,000,000 class A 'AAAsf'; Outlook Stable;

-- $570,000,000* class X-A 'AAAsf'; Outlook Stable;

-- $84,000,000 class B 'AA-sf'; Outlook Stable;

-- $68,000,000 class C 'A-sf; Outlook Stable;

-- $28,000,000 class D 'BBB+sf'; Outlook Stable;

* Notional and interest-only

The expected ratings are based on information provided by the issuer as of Aug. 4, 2014.

The certificates represent the beneficial ownership in the issuing entity, the primary asset of which is one loan having an aggregate principal balance of approximately $750 million as of the cutoff date and secured by the fee interest in the 277 Park Avenue office property in New York, NY. Proceeds of the loan were used to refinance existing debt, fund up-front reserves and pay closing and defeasance costs. The certificates will follow a sequential-pay structure.

KEY RATING DRIVERS

High Quality Office Collateral in Prime Manhattan Location: The 277 Park Avenue property is a 51-story Class A office building located on an entire block bound by Park Avenue, Lexington Avenue, and 47th & 48th Streets in the Grand Central office submarket of Midtown Manhattan. Fitch assigned a property quality grade of 'A-'.

Historical Occupancy and Credit Tenancy: The property has been well-occupied historically, with occupancy between 95%-99% since 1995. The property is 98% leased as of July 2014 with the largest tenants as JP Morgan Chase Bank and Sumitomo Mitsui Banking Co. Tenants with investment-grade credit ratings account for 84.7% of the net rentable area (NRA).

Major Tenant Subleases and Rollover Risk: The two largest tenants, JPMorgan and Sumitomo (80.3% of NRA) both roll in 2021, as well as two small tenants (a total of 82% of NRA). JPMorgan subleases approximately 600,000 square feet (sf) or 46.4% of its space, (34% of total building NRA) to a multiple subtenants. Sumitomo has recently expanded through a sublease, and significant funds for leasing will be available, if needed, through a cash flow sweep described in further detail in the presale report.

Fitch Leverage: The $750 million loan has a Fitch debt service coverage ratio (DSCR) and loan to value (LTV) of 1.33x and 65.9%, respectively, and debt of $422 per square foot (psf).

Recourse Limited to SPE Borrower: Non-recourse carveouts, including fraud, waste, and misappropriation, are limited to the SPE borrower. Fitch increased the LTV attachment point at each rating category by 2.5% to address the lack of guarantor. The loan is sponsored by the Estate of Stanley Stahl, whose current portfolio consists of six office buildings, 10 retail/commercial properties, nine residential assets, and two leaseholds in the New York City area.

RATING SENSITIVITIES

Fitch found that the property could withstand a 71.5% decline in value and an approximate 49.9% decrease in the Fitch net cash flow (NCF) prior to experiencing $1 of loss to any 'AAAsf' rated class.

Fitch performed several stress scenarios in which the Fitch NCF was stressed. Fitch determined that a 65.4% reduction in Fitch's NCF would cause the notes to break even at a 1.0x DSCR, based on the actual debt service.

Fitch evaluated the sensitivity of the ratings for class A (rated 'AAAsf') and found that a 10% decline in Fitch NCF would result in a one category downgrade, while a 32% decline would result in a downgrade to below investment grade.

The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

-- 'Global Structured Finance Rating Criteria' (May 2014);

-- 'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (September 2013);

-- 'Counterparty Criteria for Structured Finance Transactions and Covered Bonds' (May 2014);

-- 'Rating Criteria for U.S. Commercial Mortgage Servicers' (January 2014).

Applicable Criteria and Related Research: COMM 2014-277P Mortgage Trust (US CMBS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754053

Global Structured Finance Rating Criteria - Effective from 20 May 2014 to 4 August 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718468

Counterparty Criteria for Structured Finance and Covered Bonds

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

Rating Criteria for U.S. Commercial Mortgage Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=844534

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.



Fitch Ratings, Inc.

Primary Analyst

Gregg Katz, +1-312-606-2343

Senior Director

70 West Madison Street

Chicago, IL 60602

or

Secondary and Surveillance Analyst

Melissa Che, +1-212-612-7862

Director

or

Committee Chairperson

Eric Rothfeld, +1-212-908-0761

Managing Director

or

Media Relations, New York

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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