Fitch Affirms MCAP 2014-1

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed all classes of MCAP CMBS Issuer Corporation's commercial mortgage pass-through certificates, series 2014-1 (MCAP 2014-1). A detailed list of rating actions follows at the end of this press release. All currencies are denominated in Canadian dollars (CAD).

KEY RATING DRIVERS

The affirmations reflect generally stable performance of the pool since issuance. With the exception of the fourth and eighth largest loans, which have been designated as Fitch Loans of Concern, all other loans in the top 15 continue to perform within Fitch's expectations at issuance.

As of the November 2016 distribution date, the pool's aggregate principal balance has been reduced by 5.2% to $212.4 million from $224 million at issuance. No loans have transferred to special servicing since issuance.

Loans of Concern: Fitch has designated two loans (combined, 11.2% of pool) as Fitch Loans of Concern, both of which are among the top 15 loans. The fourth and eighth largest loans, 1 & 20 Royal Gate Boulevard and 1177 11 Avenue SW, have both experienced significant occupancy declines since Fitch's last rating action.

The 1 & 20 Royal Gate Boulevard loan (6.5% of pool) is secured by a 284,135 square foot (sf) mixed-use industrial/office building located in Vaughan, ON. Property occupancy in 2016 declined to 63.3% from 84.2% in September 2015 after the largest tenant, Silicor Materials (34% of the net rentable area [NRA]), vacated upon its December 2015 lease expiration. The loss of the largest tenant was partially offset by a new lease with Ideal Warehouse (13.1% of NRA), which commenced in December 2015 and expires June 2026. The borrower had provided an upfront $1.95 million letter of credit at origination to mitigate the imminent lease rollover during the loan term. According to the servicer, the vacant space is currently being marketed, but no new leasing offers have been presented to date. The loan, which is scheduled to mature in July 2019, carries a partial recourse guarantee (50% of loan balance) from the sponsor, Augend Investments Limited.

The 1177 11 Avenue SW loan (4.7%) is secured by a 61,925 sf office building with ground level retail located in Calgary, AB. Property occupancy declined to 39.8% after the largest tenant, ThyssenKrupp Industrial Solutions (45% of NRA), vacated upon its June 2016 lease expiration. The tenant had already previously downsized its space from 60% of the NRA at issuance to 45% in 2015. According to the servicer, the borrower continues to market the property's vacancies and is currently in preliminary stages of discussions with a potential tenant. The loan, which has an upcoming maturity in February 2017, carries a partial recourse guarantee (50% of loan balance) from the sponsor, Riaz Mamdani.

Canadian Loan Attributes: The ratings reflect strong Canadian commercial real estate loan performance, including a low delinquency rate and low historical losses of less than 0.1%, as well as positive loan attributes such as short amortization schedules, recourse to the borrower, and additional guarantors.

Significant Amortization: The pool has a weighted average amortization term of 25.2 years, which represents faster amortization than U.S. conduit loans. There are no partial or full interest-only loans. The pool's scheduled maturity balance represents a paydown of 7.8% of the November 2016 balance and 12.6% of the balance at issuance.

Loans with Recourse: Of the pool, 82.9% of the loans feature full or partial recourse to the borrowers and/or sponsors.

RATING SENSITIVITIES

Rating Outlooks for all classes remain Stable due to increasing credit enhancement and the generally stable performance of the pool. Future upgrades are possible should the performance of the Fitch Loans of Concern improve and as the 2017 and 2018 maturing loans (19.4% and 8.6% of the pool, respectively) pay off as expected. Downgrades may be possible should the performance of the Fitch Loans of Concern continue to decline further.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

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

Fitch has affirmed the following ratings:

--$177.7 million class A at 'AAAsf'; Outlook Stable;

--$5.6 million class B at 'AAsf'; Outlook Stable;

--$8.1 million class C at 'Asf'; Outlook Stable;

--$7 million class D at 'BBBsf'; Outlook Stable;

--$3.4 million class E at 'BBB-sf'; Outlook Stable;

--$2.8 million class F at 'BBsf'; Outlook Stable;

--$2.8 million class G at 'Bsf'; Outlook Stable.

Fitch does not rate the interest-only class X, or the $5 million non-offered class H.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

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

https://www.fitchratings.com/site/re/883130

U.S. and Canadian Multiborrower CMBS Surveillance Criteria (pub. 11 Nov 2016)

https://www.fitchratings.com/site/re/889634

Related Research

MCAP 2014-1 -- Appendix

https://www.fitchratings.com/site/re/821728

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015146

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015146

Endorsement Policy

https://www.fitchratings.com/regulatory

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Copyright (C) 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

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Fitch Ratings
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Analyst
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New York, NY 10004
or
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or
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Source: Fitch Ratings

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