DBRS Finalizes Provisional Ratings on COMM 2015-CCRE27 Mortgage Trust

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE27 (the Certificates) issued by COMM 2015-CCRE27 Mortgage Trust. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M 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 B at AA (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 X-B, X-C, X-D, X-E, X-F, D, E, F, G and H have been 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 65 fixed-rate loans secured by 96 commercial properties. The trust assets contributed from one loan, representing 7.5% of the pool, are shadow-rated AA (low). When 7.5% of the pool has no proceeds assigned below the rated floor, the resulting pool subordination is diluted, or reduced, below that rated floor. Proceeds for the shadow-rated loan are floored at its respective rating within the pool. 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 (NCF) and their respective actual constants, seven loans, representing 14.5% of the total 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 58.8% of the pool having DBRS Refinance DSCRs (Refi DSCR) below 1.00x. However, the DBRS Refi DSCR for the loans are based on a weighted-average (WA) stressed refinance constant of 9.76%, which implies an interest rate of 9.20%, amortizing on a 30-year schedule. This represents a significant stress of 4.7% over the WA contractual interest rate of the loans in the pool. Additionally, 91.0% of these loans with DBRS Refi DSCRs below 1.00x are located in urban or suburban markets.

Seven loans, representing 25.9% of the pool, are located in urban markets, which benefit from consistent investor demand even in times of stress. Furthermore, only 16 loans, representing 12.8% of the transaction balance, are located in tertiary markets, and none of the collateral properties are located in rural markets. Additionally, only six loans, representing 5.1% 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. As such, DBRS modeled single-tenant properties with a higher probability of default (POD) and cash flow volatility compared with multi-tenant properties. The largest loan in the pool, 11 Madison Avenue, exhibits credit characteristics consistent with investment-grade shadow ratings. The loan represents 7.5% of the total pool balance and has credit characteristics consistent with an AA (low) shadow rating.

Eight loans, representing 20.6% of the pool (including three loans in the top 15), are structured with IO payments for the full loan term. An additional 30 loans, representing 45.5% of the pool (including eight in the top 15), have remaining partial IO periods ranging from 11 to 71 months. The DBRS Term DSCR is calculated by using the amortizing debt service obligation and the DBRS Refi DSCR is calculated considering the balloon balance and lack of amortization when determining refinance risk. DBRS determines POD based on the lower of Term or Refi DSCR, so loans that lack amortization will be treated more punitively.

The DBRS sample included 26 of the 65 loans in the pool, representing 72.0% of the pool by loan balance. Site inspections were performed on 38 of the 96 properties in the portfolio, representing 64.7% of the pool. The DBRS sample had an average NCF variance of -9.8% and ranged from -23.7% to +4.6%. DBRS identified ten loans, representing 13.2% of the pool (including two in the top 15), that have sponsorship and/or loan collateral associated with a prior discounted payoff, loan default, Delaware Statutory Trust borrower, limited net worth and/or liquidity relative to loan obligation, a historical negative credit event and/or a recent litigation issue (pending and/or prior) associated with their respective loan collateral. DBRS increased the POD for loans with identified sponsorship concerns.

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.

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form-15E) which contains the description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not rely on the due diligence services outlined in Form-15E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.