DBRS Assigns Provisional Ratings to Morgan Stanley Bank of America Merrill Lynch Trust 2015-C23

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C23 (the Certificates) to be issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C23. 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-FG at AAA (sf)
-- Class X-H at AAA (sf)
-- Class B at AA (sf)
-- Class PST at A (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)
-- Class G at B (low) (sf)

Classes D, E, F, G, H, X-B, X-FG and X-H will be privately placed.

The X-A, X-B, X-FG and X-H 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 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 the Class PST certificates. Class PST certificates may be exchanged for the full certificate balance of the Class A-S, Class B and Class C certificates.

The collateral consists of 75 fixed-rate loans secured by 151 commercial and multifamily properties, comprising a total transaction balance of $1,072,706,368. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the loan term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized Net Cash Flow (NCF) and their respective actual constants, two loans, representing 2.4% of the pool, had a DBRS Term Debt Service Coverage Ratio (DSCR) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default. Additionally, to assess refinance risk given the current low interest rate environment, DBRS applied its refinance constants to the balloon amounts, resulting in 36 loans, representing 66.2% of the pool, having DBRS Refinance (Refi) DSCRs below 1.00x. However, the DBRS Refi DSCRs for the loans are based on a weighted-average (WA) stressed refinance constant of 9.82%, which implies an interest rate of 9.19%, amortizing on a 30-year schedule. This represents a significant stress of 5.0% 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 34 equal-sized loans, though the top ten loans represent 46.0% of the pool, which is not particularly low. Diversity is further enhanced by the six loans, representing 20.6% of the pool, that are secured by multiple properties (82 in total). Increased pool diversity helps to insulate the higher-rated classes from event risk. Loans secured by properties located in tertiary and rural markets represent 31.3% of the pool, including five of the top 15 loans. Properties located in tertiary and rural markets are modeled with significantly higher loss severities than those located in urban and suburban markets. Additionally, seven loans, representing 23.7% of the pool (including four in the top 15), are structured with IO payments for the full loan term. An additional 40 loans, representing 45.0% of the pool (including eight in the top 15), have partial IO periods ranging from six to 60 months.

The DBRS sample included 31 of the 75 loans in the pool, representing 72.9% of the pool by loan balance. Site inspections were performed on 47 of the 151 properties in the portfolio (68.1% of the pool by allocated loan balance). DBRS conducted meetings with the on-site property manager, leasing agent or a representative of the borrowing entity for 40.6% of the pool.

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.

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

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

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.

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