DBRS Assigns Provisional Ratings to Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C21 (the Certificates), to be issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-E at AAA (sf)
-- Class X-FG at AAA (sf)
-- Class B at AA (high) (sf)
-- Class PST at A (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class G at B (low) (sf)

Classes D, E, F, G, X-B, X-E and X-FG will be privately placed. Classes X-A, X-B, X-E and X-FG balances are notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

Up to the full certificate balance of the Class A-S, Class B and Class C certificates may be exchanged for Class PST certificates. Class PST certificates may be exchanged for up to the full certificate balance of the Class A-S, Class B and Class C certificates.

The collateral consists of 64 fixed-rate loans secured by 99 commercial properties comprising a total transaction balance of $871,249,589. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized Net Cash Flow and their respective actual constants, there were no loans with a DBRS Term Debt Service Coverage Ratio (DSCR) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default; however, this transaction has a high concentration of loans suffering from elevated refinance risk. To assess refinance risk given the current low interest rate environment, DBRS applied its refinance constants to the balloon amounts, resulting in 58.3% of the pool having refinance DSCRs below 1.00x. The DBRS Refinance DSCRs for these loans are based on a weighted-average (WA) stressed refinance constant of 9.9%, which implies an interest rate of 9.3%, amortizing on a 30-year schedule. This represents a significant stress of 4.2% over the WA interest rate of the loans in the pool.

Overall, the pool is relatively diverse based on loan size, with a concentration profile equivalent to that of a pool of 29 equal-sized loans. Diversity is further enhanced by nine loans, representing 17.1% of the pool, that are secured by multiple properties (44 in total). Increased pool diversity helps to insulate the higher-rated classes from event risk. Twelve loans, representing 16.8% of the pool, are secured by properties that are leased either fully or primarily to single tenants. Loans secured by properties occupied by single tenants have been found to suffer from higher loss severities in the Event of Default. Additionally, seven loans representing 28.4% if the pool, including five in the top ten, are structured as IO for the full loan term. An additional 31 loans, representing 41.8% of the pool, including three in the top ten, have partial IO periods ranging from nine to 60 months.

The DBRS sample included 22 of the 64 loans in the pool, representing 66.8% of the pool by loan balance. Two of the sampled loans, including 555 11th Street NW and Talbots Flagship Store, representing 8.4% of the pool, were modeled with Above Average property quality. One loan, representing 0.75% of the pool, was given Below Average property quality.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Other Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.