DBRS Confirms All Classes of Morgan Stanley Capital I Trust 2015-MS1

DBRS Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-MS1 issued by Morgan Stanley Capital I Trust 2015-MS1:

-- 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 B at AA (low) (sf)
-- Class PST at A (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class G.

The rating confirmations reflect that the performance of the transaction has remained stable since issuance in July 2015. The collateral consists of 54 fixed-rate loans secured by 59 commercial and multifamily properties. As of the May 2016 remittance, the pool has experienced a collateral reduction of 0.5% since issuance as a result of loan amortization, with all of the original 54 loans remaining in the pool. Approximately 43 loans, representing 69.4% of the current pool balance, are reporting partial or year-end 2015 financials. These loans reported a weighted-average (WA) debt service coverage ratio (DSCR) of 1.92 times (x) and a WA debt yield of 9.3%. At issuance, the pool reported a WA DSCR and debt yield of 1.75x and 8.7%, respectively. There are no loans on the servicer’s watchlist or in special servicing.

The Premier Apartments loan (Prospectus ID#9, 3.8% of the pool balance) is secured by a 160-unit, Class A apartment complex in Silver Spring, Maryland. Built in 2014, the improvements consist of a 14-story apartment building with 2,635 square feet (sf) of ground-level commercial space. The YE2015 DSCR of 0.88x represents a decline from the DBRS UW (underwritten) DSCR of 1.08x. The net cash flow (NCF) decline of 17.6% was attributable to a 32.0% increase in operating expenses, while effective gross income was in line with expectations at issuance. The large increase in operating expense was due to elevated general & administrative expenses, which was reported at over six times the UW amount. DBRS expects the operating expenses to more closely align with expectations as full-year performance and financials become available. According to the March 2016 rent roll, the residential space was 92.5% occupied, compared with 95.6% at issuance. Additionally, the commercial space is occupied by Wells Fargo on a ten-year lease. According to Reis, the property is a part of the Silver Spring submarket. While the vacancy rate for similar class properties in the submarket is slightly lower compared to the subject at 6.4%, the average rental rate at the property is higher, at $1,837 per unit compared to $1,620 in the submarket, and has increased by 2.4% since issuance.

At issuance, DBRS shadow-rated three loans investment-grade: 32 Old Slip Fee (Prospectus ID#3, 6.8% of the current pool), 841-853 Broadway (Prospectus ID#6, 5.7% of the current pool) and Alderwood Mall (Prospectus ID#5, 5.6% of the current pool). DBRS confirms with this review that the performance of these loans remain consistent with investment-grade loan characteristics.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are 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 methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.

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