Fitch Assigns Final Ratings to NLY Commercial Mortgage Trust 2014-FL1

Fitch Ratings has assigned the following ratings and Rating Outlooks to the NLY Commercial Mortgage Trust 2014-FL1, commercial mortgage pass-through certificates, series 2014-FL1:

--$178,794,000 class A 'AAAsf'; Outlook Stable;

--$25,471,000 class B 'AA-sf'; Outlook Stable;

--$17,480,000 class C 'A-sf'; Outlook Stable.

Fitch does not rate the $38,955,000 class D, $24,971,000 class E, $35,460,000 class F, $78,410,000 class G, or the $260,700,000 interest-only class X.

The certificates represent the beneficial ownership in the trust, the primary assets of which are 10 loans secured by 23 commercial properties having an aggregate pooled principal balance of $399,541,000 as of the cutoff date. The loans were directly originated or co-originated by Annaly CRE LLC, a direct wholly-owned subsidiary of Annaly Commercial Real Estate Group, Inc., a wholly-owned subsidiary of Annaly Capital Management, Inc.

Fitch reviewed the transaction's collateral, including cash flow analysis, third party reports, loan documents, an asset summary review and site inspections.

KEY RATING DRIVERS

Transitional, Yet Well-Structured Loans: 57.2% of the pool, and in particular, the largest loan, is secured by properties that have not stabilized. The associated risks, including downtime during renovation, lease-up and completion are addressed through experienced sponsorship, credible business plans and loan structural features, including construction guaranties, reserves, cash management and performance triggers, and additional funding mechanisms. Given the transitional nature of the majority of loans and Fitch cash flow generally reflecting income in place, the stressed LTV for the transaction is relatively high at 116.7%.

Concentrated Pool: The pool is secured by only 10 loans, with the largest three loans representing 53.7% of the pool. The largest loan in the pool is Optima Chicago (28.8%). Two loans 13.8% are secured by multiple properties.

Largest Loan Pays Pro-Rata: Principal repayment for the largest loan in the pool, Optima Chicago, will pay the certificates on a pro-rata basis, subject to performance triggers, including 50% of the pool based on the cut-off date pool balance being outstanding at the time of repayment.

Additional Debt: Only one loan (3.9% of the pool) has additional debt in the form of a future funding mezzanine loan. The mezzanine position is fully subordinated, is expected to be subject to a standard intercreditor agreement and funded in conjunction with fresh sponsor equity.

RATING SENSITIVITIES

Fitch found that the pool could withstand a 67.7% decline in value and an approximately 49.1% decrease in the Fitch cash flow prior to experiencing $1 of loss to the 'AAAsf' rated class.

Fitch evaluated the sensitivity of the ratings for class A and a 10% decline in Fitch NCF would result in a one category downgrade, while a 30.3% 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 pre-sale report available at 'www.fitchratings.com'.

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

Applicable Criteria and Related Research:

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

--'Global Structured Finance Rating Criteria' (May 2013);

--'U.S. Commercial Mortgage Servicer Rating Criteria' (February 2013);

--'Counterparty Criteria for Structured Finance Transactions and Covered Bonds' (May 2013).

Applicable Criteria and Related Research:

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

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

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

U.S. Commercial Mortgage Servicer Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=584005

Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707156

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=818478

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Fitch Ratings
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Karen Trebach, [phone]
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