DBRS Assigns Provisional Ratings to COMM 2015-LC21 Mortgage Trust

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-LC21 (the Certificates) to be issued by COMM 2015-LC21 Mortgage Trust. 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 X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class X-E at AAA (sf)
-- Class X-F at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

Classes X-B, X-C, X-D, X-E, X-F, E and F will be privately placed.

The Class X-A, X-B, X-C, X-D, X-E and X-F 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.

The collateral consists of 103 fixed-rate loans secured by 198 commercial and multifamily properties, with a transaction balance of $1,321,890,997. The pool exhibits a DBRS weighted-average term debt service coverage ratio (DSCR) and debt yield of 1.58 times (x) and 8.6%, respectively, based on the whole loan balances. The DBRS sample included 37 loans, representing 59.0% of the pool. Overall, the pool is relatively diverse based on loan size, with a concentration profile equivalent to that of a pool of 49 equal-sized loans. In addition, the top ten loans account for only 32.4% of the pool, which is well below typical concentrations ranging from 40.0% to 55.0%. Increased pool diversity helps to insulate the higher-rated classes from event risk. The largest loan in the pool is structured with a large subordinate B-Note, which reduces the Trust balance severity of loss in the event of default.

The largest loan in the pool, secured by the $100.0 million A-2A Note of the Courtyard by Marriott Portfolio (7.3% of the pool), was shadow-rated AAA by DBRS, given the portfolio’s granular composition of 65 hotels, strong flag, long-term ownership and low leverage indicated by the DBRS Exit Debt Yield of 25.0% on the A-Note amount. The $670.0 million whole loan consists of senior A-Note debt of $315.0 million and controlling subordinate B-Note debt of $355.0 million.

The transaction has a high concentration of full-term and partial-IO loans, representing 61.0% of the total pool, including five of the top ten loans that are structured with full-term IO payments. As a result, the pool will only amortize down by 13.7% during the life of the transaction. Additionally, 50 loans, representing 49.9% of the pool, have Refinance (Refi) DSCRs below 1.00x. Twenty-two of these loans, representing 27.8% of the pool, have DBRS Refi DSCRs of less than 0.90x. However, the DBRS Refi DSCRs are based on a weighted-average stressed refinance constant of 9.8%, which implies an interest rate of 9.2%, amortizing on a 30-year schedule. This represents a significant stress of 4.9% over the weighted-average contractual interest rate of the loans in the pool. The transaction also includes 12 loans, representing 22.4% of the pool, that are secured by either full- or limited-service hotels, an asset class that has shown to have the highest cash flow volatility of all major property types.

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 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 Related Research or by contacting us at info@dbrs.com.

The applicable methodology is North American 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.